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Risk Management and Margin Management Advised

by 5m Editor
13 January 2011, at 7:59am

CANADA - The vice president of agri-business capital with AgStar Financial Services says successful pork producers in the US have been focusing on risk management and margin management to cushion their operations from the extreme volatility in the market, writes Bruce Cochrane.

Financing Agriculture in the Future will be among the topics discussed next week as part of the 40th annual Banff Pork Seminar.

AgStar Financial Services vice president of agri-business capital Mark Greenwood says at a time when the agriculture industry has faced increased production costs and unprecedented market volatility, which has driven some lenders out of agricultural financing, the need for capital to finance agriculture has virtually doubled making it harder to obtain financing.

Mark Greenwood-AgStar Financial Services

There has been opportunities over the last two to three years where there's been opportunities to lock in profits or even minimize losses.

I've been very very impressed with the very successful production systems over the last couple of years when we've had all this volatility.

Still they've been successful and profitable and really it's been through that risk management or margin management concept.

They spend a tremendous amount of time and they've actually dedicated resources and all they really do is focus on that margin management concept going forward.

If you're going to stay in the ag sector with the amount of volatility in there, I have no idea what the future is going to indicate, but if you focus on margin and a positive margin and what you think is deemed an acceptable return to your operation your chances of being profitable and successful with this level of high cost of production you still have a chance of being profitable.

I would say overall there's a greater percent of the producers all over the United Sates, they're more comfortable in managing the amount of volatility in the market place because they've really focused on that margin management concept.

Mr Greenwood stresses that although you can't predict the future, overall, people are better prepared for the volatility.

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