From the June 01, 2011 issue of Futures Magazine • Subscribe!

Simpson knows cattle inside and out

Trader Profile


Ray Simpson worked in a cattle feedlot when he was a teenager, and after graduating from Texas Tech University in 1979 he would return to the livestock business, working for Cargill at one of its packing plants.

"I bought cattle for that company for 17 years. I learned a lot; it was where I really got my business foundation," Simpson says.

Although he didn’t hedge for Cargill, he learned the dynamics of the business. With a lifetime in the cattle business, he began trading for his own account, and after he left Cargill, he purchased his first feedlot.

"Cattle and feedlots: I know that business inside-out, upside-down," Simpson say. And he understands hedging. "I never would have survived 9/11 or the BSE (Mad Cow disease) scare in 2003; I never would have survived 2008 without hedging. Those kinds of markets put a lot of people out of business," he says.

Most importantly, Simpson has a clear understanding of the difference between speculating and hedging. He may be from Texas, but he is no Texas hedger. "They are two totally separate entities," Simpson says. "My hedge account is my hedge account, and that is my cattle business. When I put a hedge on, I don’t touch it until the cattle [are] sold. The way I look at my spec account, I know that in the springtime the cattle market gets pretty good. In the wintertime when it gets wet and slow, the cattle will slow down in their gait. Around the 4th of July, the cash market typically bottoms out and looks forward to a fall rally."

This expertise allowed Simpson to trade profitably, to manage the risk in his feedlot business and to maintain profitability. "It is a very risky business. I offset my risk, I short-hedge my cattle and long-hedge my corn. I try not to buy anything that doesn’t look like it can have a profit," he says.

Simpson’s brokers at Lakefront Futures & Options, LLC noticed this and approached him about managing money; Ceres Funds Management LLC was registered in 2005 and began managing customer funds in 2008.

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