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Hog Producers Advised to Protect Themselves by Forward Pricing

By Bruce Cochrane

The director of Risk Management with h@ms Marketing Services is advising pork producers to protect themselves from anticipated drops in the value of live hogs by forward pricing a portion of their production.

A combination of higher U.S. slaughter numbers and lower than expected losses from PED has resulted in a steady decline in live hog prices since they reached record levels last August.

Tyler Fulton, the director of risk management with h@ms Marketing Services, says, the impact of PED on the hog supply has been much more moderate this winter than in the winters of 2013 and 2014.

Tyler Fulton-h@ms Marketing Services:
I think producers should really be considering taking some price protection right straight through the summer time frame but in particular probably focus more on the fall and early winter months.

Right now those prices represent quite reasonable value.
They're running at a fairly average level, an average discount to what the summer highs are currently offered at but yet we have a lot of fundamentals that could really put a lot of price pressure in those back time frames.

So relative to the potential of significant drops in prices for the third and fourth quarter, I think forward prices that are offered right now are generally pretty good value.

As far as the summer months go I think we're going to continue to see a really choppy market, really volatile, really no obvious kind of seasonal moves.

We'll just see higher and lower, big price swings from one week to the next, and so consequently, I think it does make some sense to price a portion of their summer production as well.

Fulton says the USDA's March Hogs and Pigs report will provide some insight as to how significantly the U.S. herd has grown and an indication of where we can expect prices to be moving forward.

Source: Farmscape

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