Managing Margins Key to Remaining Profitable

CANADA - The president of Paragon Economics suggests the ability to manage margins will be key to remaining profitable as pork producers contend with rising feed costs and limited availability, Bruce Cochrane writes.
calendar icon 14 June 2011
clock icon 3 minute read

North American pork producers are again facing tight profit margins due to increasing feed costs.

Paragon Economics president Dr Steve Meyer says Canada has feed availability concerns toward the end of the crop year in the US and, despite near record high hog prices, pork producers are looking at losses for most of the rest of this year.

Dr Steve Meyer-Paragon Economics

USDA has projected 730 million bushels of corn carry-out and when you spread that all over the country it's a pretty thin layer and so there's some spots that are going to maybe not have corn available when we get into the tail-end of this crop year.

We've warned producers, especially if they're near a number of ethanol plants, the high corn usage areas, that they need to know where that corn's going to come from to feed those hogs into August and maybe into September as we finish the crop year.

Our southern areas are getting harmed by very hot dry conditions.

We kind of depend on them for early corn harvest sometimes and they might not have much so there's some issues there from an availability standpoint that we need to always be aware of at the tail end of the crop year.

Obviously right now we've had problems getting the corn planted, we're going to lose some acres because of flooding.

We're going to have to have an above trend yield to make a crop even as big as USDA predicted back in May.

It's a critical situation that I think leaves quite a bit of top side possibilities in corn and soybean prices as well.

They're going to suffer from the same kind of acreage restrictions, maybe not as severe because they have a little more planting flexibility.

Dr Meyer says those who are doing the best are those accomplished at managing risk and suggests producers will need to look at locking in feed prices when they're affordable and locking in hog prices when there's a margin.

He acknowledges that takes a lot of skills that at one time were probably not in the average pork producers' tool box but they have to be there now.

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