By Bruce Cochrane.
H@ms Marketing Services is advising pork producers to be significantly hedged for the last half of this year to protect themselves from the uncertainties of changing U.S. trade policy and fluctuating currency values.
The USDA's Quarterly Hogs and Pigs Report, released March 31, forecast larger than year ago U.S. slaughter hog numbers and an expansion of the U.S. breeding herd.
Tyler Fulton, the Director of Risk Management with h@ms Marketing Services, says rumblings of changing U.S. trade policy is probably the source of the greatest uncertainty in the market right now.
Tyler Fulton-h@ms Marketing Services:
It's a critical factor in determining hog prices.
When we have a fairly high degree of certainty that we're going to be looking at significantly more hogs the export portion of the demand side of the equation is absolutely critical to the ability for the market to clear those excess supplies and so any concern about a change in U.S. trade policy or any major currency fluctuations would have vey significant impacts on the value of hogs out to the end of this year.
What we're advocating I think right now is for producers to be somewhere between one third and one half hedged for the last half of 2017.
Because of our reliance on the export markets and the fact that we really need to maintain export growth at minimum 15, likely closer to 20 percent larger than year ago levels just in order to maintain similar prices to 2016, we think that the current forward price offering is really quite good value, given the uncertainty of exports and the certainty that comes with supply.
Fulton says h@ms Marketing Services is advocating producers to be significantly hedged pretty much as soon as possible.
Source: Farmscape