By Bruce Cochrane.
The Director of Risk Management with h@ms Marketing Services is advising pork producers to look to forward contracting to protect themselves from downward pressure on live hog markets over the next three to four months resulting from large slaughter hog supplies.
While increased U.S. slaughter capacity has been helping maintain competition, large supplies of slaughter hogs have resulted in lower prices over the past week or so.
Tyler Fulton, the Director of Risk Management with h@ms Marketing Services, notes the next three months is the time of year when hog production peaks and this year hog numbers started out three to four percent higher than last year so we can expect record high hog slaughter and pork production over the next month or two.
Clip-Tyler Fulton-h@ms Marketing Services:
I think that current forward contract values are pretty good value for the December January, maybe even February time frame.
There's still a great deal of uncertainty with the heavy supply that we expect and sluggish exports and so we can't necessarily rely on these new plants to have such a positive impact to overlook those, especially in that time frame.
I would say that current forward prices for the winter months are fair value or good value for producers that aren't already hedged in that time frame.
Later on however I think that there's reason for optimism.
I think that in the April through August time frame of 2018 there's great potential to see some even better prices than what we've seen.
We've seen the futures actually climb about four to five percent over the course of the last week and a half and I think that there's solid rationale that we could see some better opportunities for hedging.
With that in mind I would set targets at 12 to 15 dollars per CKG higher than current forward contract values in that spring summer time frame.
Fulton says without the expanded U.S. hog slaughter we would already be running up against capacity.
Source: Farmscape