By-Bruce Cochrane.
An agricultural Economics professor with the University of Missouri is advising North American pork producers to consider securing feed supplies in advance of need and locking in some margin on their hogs during the coming months.
Although the summer of 2011 has seen some record high North American hog prices high feed costs have taken a big bite out of profitability.
Dr. Ron Plain, an agricultural economics professor with the University of Missouri, notes USDA is advising livestock and poultry producers to expect this year's corn crop to be sold at and average price of around 6.75 a bushel, 1.45 a bushel higher than the 2010 crop which currently holds the record.
Dr. Ron Plain-University of Missouri:
Feed cost is a big factor and I contend that trying to stay a little bit bought ahead on feed is a good strategy.
Interestingly in the last several years we have seen the low in corn prices coming a bit earlier in the fall than normally.
It used to be that October was the odds on favorite for the low price month for corn and it seems now that more August and September is when we very often have the bottom so staying bought ahead on feed I think is a good strategy.
Then, as far as marketing hogs and particularly trying to hedge prices using futures contracts, past experience indicates that those hogs that go to slaughter during the fourth quarter or the first quarter of the year generally have offered a little better opportunity to hedge at a gain than prices sold during the summer of the year so I would argue producers might be looking at some of these futures contracts and locking in some margin here in coming months.
Dr. Plain observes these record prices put a lot of pressure on producers to manage their cash flow.
He says there's a lot money flowing through pork producers fingers and they've got to be sharp managers to hang on to enough of it to pay the bills.