Pork Producers Advised to Lock in Feed Prices as They Forward Contract Hogs

The Director of Risk Management with HAMS Marketing Services is advising pork producers to lock in their feed costs as they forward contract their hog production.

The North American hog sector has started the transition from the tight hog supplies of summer as numbers have started ramping and are running in line with those of the last year and an average of the past five years.Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says North American pork demand remains the main factor influencing pork prices.

Clip-Tyler Fulton-HAMS Marketing Services:

One thing to note is China has had a diminished effect on North American pricing so it's really more the domestic market that's driving pricing now. We do think that there could be some price pressure.The reality is the futures and the forward market that's priced off of the futures exceeds any previous year's forward prices at this time of year.

So, we think that there's some pretty good opportunities to secure solid pricing but we would maintain the idea that you should couple that with your feed purchases because that's where the risk lies, in that feeding margin, the value of the feed ingredients that you need to purchase relative to the value of the hogs that you're selling.

One thing that has worked in our favor is the weaker Canadian dollar but it's impacting the cost side as well so it makes it important to match those pricing decisions, those risk management decisions on your feed as well your hog side.

Fulton says the heavier supplies typically mean pressure on prices but, on the pork cutout, we're seeing fairly firm values. He says the indication is that pork is performing well in this inflationary environment and is well positioned over the next four or five months to continue to perform reasonably well in the context of the heavier supply.