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Increased Market Volatility Raises Need for Effective Risk Management

by 5m Editor
29 October 2013, at 3:55am

CANADA - A farm management consultant with MNP says as markets have become more and more volatile the need for effective risk management has increased, according to Bruce Cochrane.

Farmers have several tools they can use to manage risk including various government programs such as AgriStability, the ability to contract directly with the processing plants and preset prices, the ability to lock in grain prices and forward contracting hogs on the futures market.

"A Whole Farm Approach to Risk Management for Hog Producers" will be among the topics discussed as part of Manitoba Pork Council's fall pork producers meetings, today (29 October) in Niverville and Wednesday in Portage La Prairie.

Eric Olson, a farm management consultant with MNP, says markets are becoming more and more volatile and they're influenced by factors outside the farmers' control.

Eric Olson-MNP

When we work with producers at MNP one of the things we look at and what we're going to talk about is active management.

We want our producers to have all the information to make the good decisions so before we start using the risk management tools you need to understand your cost of production.

You need to understand your grain costs going forward and you need top know your bottom lines.

Profitability and survivability really depend on the markets themselves.

Once we had the drought last year and grain prices had spiked, the cost of feeding pigs had gone up dramatically.

It put the whole industry into a negative position so in that case you're looking at survivability, using the tools, how do I get through the year so that I'm farming next year.

Right now grain prices have come down, hog prices are pretty strong, we're looking at real positive margins so, in that case, you're using the tools to hopefully lock in some profits and make sure you do make money going forward.

Mr Olson says farms have gotten a lot bigger, the result of that is the risk farmers face is a lot bigger and the markets are moving a lot more dramatically so depending on the day you market your product you could be making or losing money.

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