CANADA - The Canadian Pork Council reports the prospects of a program designed to reduce the uncertainty that surrounds hedging as a business risk management tool is attracting the interest of lenders, writes Bruce Cochrane.
The Canadian Pork Council is preparing to launch a "Pork Industry Hedging Program Analysis".
The study will explore the feasibility of a program that can be used to mitigate the risk of margin calls so that hedging becomes a useful business risk management tool for pork producers.
Canadian Pork Council chair Rick Bergmann says developing effective risk management has long been a priority for governments and the hog industry and the concept is attracting the interest of lenders.
Rick Bergmann-Canadian Pork Council:
A lot of the farms these days and our industry is morphing.
It's quite capital intense and the ability for accessing credit is so crucial for producers and for their operations.
Often the credit is for running the operation, however there's also credit that would be needed for the ability to effectively use this hedging program.
This process will determine those needs and also opportunities moving forward.
We recently had a meeting with one of the major ag lenders of the country and talking about the potential of a program like this was really intriguing for the group that we spoke to.
We take that very seriously, when lending partners like the ones we spoke to are very curious about the opportunity of something like this so we're moving forward at a pace that we can hopefully get things done sooner rather than later.
The project will gather statistics regarding current forward pricing program opportunities in various Canadian markets and the anticipated demand for a program, and identify why Canadian farmers use hedging and other risk management strategies to a lesser extent than their US counterparts.
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