Pork Producers Encouraged to Take Advantage of Current Strong Futures Market

Mar 12, 2014

By Bruce Cochrane

Pork producers are being encouraged to consider taking advantage of the current strong hog market by locking in prices on the futures market for a portion of their production.

As the result of fears over the potential impact of Porcine Epidemic Diarrhea on slaughter hog supplies cash and futures markets have soared to near record levels.

Tyler Fulton, the director of risk management with h@ms Marketing Services, says we're at a point where earlier losses from PED are expected to start impacting hog supplies.

Tyler Fulton-h@ms Marketing Services:
It's been a long time since we've seen this level of volatility.
My focus is strictly on the market impact of this disease but obviously the producers' focus should be largely in attempting to protect their herds and operations by taking the appropriate measures.

That said, from a financial perspective, I think, for those producers that haven't taken any forward protection yet, they should look at maybe building a position over the course of the next three weeks to two months or so because it's over that time frame that there'll be greater certainty as to what the market impact is going to be.
The other thing that's going to happen over the next month or so is the USDA will come out with a hogs and pigs report which will provide probably the best estimate as to how big or how small this hole could be.

Where we are now things look very bullish.
Things look like we're going to be looking at record high prices right straight through the summer time but this is far from certain yet and so I think it's important that producers consider taking some protection by locking in a portion of their production at these unprecedented prices.

Fulton acknowledges it's a very fluid situation and the market is willing to put significant premiums on the futures values but, if at any point, the market gets a sense that this is over done things could turn around and move lower very quickly.

Source: Farmscape

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