Pork producers advised to focus on margins when making forward contracting decisions

By Bruce Cochrane

The Director of Risk Management with HAMS Marketing Services is advising pork producers in western Canada to focus on margins rather than the price of hogs or the price of feed as they make their forward contracting decisions.

The U.S. Department of Agriculture's quarterly hogs and pigs report, released last week, indicates higher than expected reductions in hog numbers, including an approximately two percent decline in the number of pigs kept for breeding, indicating there will be tighter supplies to come.

Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, notes we continue to see new highs almost every day on the corn market while protein meal prices have been only marginally off the highs.

”For perspective, the September corn futures are trading at close to 7.25 per bushel and really there's no indication of it turning around any time soon. The trend is decisively higher and it pertains to the fact that, from a global perspective, we're looking at likely some pretty tight feed stocks in large part largely due to the conflict in the Ukraine and the impact that it has on their production. They export approximately 35 percent of all the tradable global stocks and so that makes a major difference when there's obvious concern over the forecast production in that area so it just continues to drive higher. How does that bear out in terms of profitability for hog producers in western Canada? It's a very difficult thing. It's a moving target,” explained Tyler Fulton of HAMS Marketing Services in in Headingley, Manitoba.

“There's great volatility in both the hog and feed input market and so producers need to be focused on timing and approaching their hedging decisions based on their margins, not solely based on the price of hogs or strictly the price of feed,” Fulton added.

Fulton says the situation is volatile but there's currently still some profitability to be secured, depending on your operation.

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