Should you be hedging your hog production this spring?

The Director of Risk Management with HAMS Marketing Services is recommending a steady disciplined programme of hedging a portion of hog production heading into the spring and summer.
calendar icon 24 January 2020
clock icon 3 minute read

Despite record US production, North American live hog prices have been holding steady since the start of the new year, supported in part by continuing steady to strong domestic demand for pork and the anticipation of increased exports.

Speaking to Farmscape, Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says there is an expectation that we'll see increased movements of pork to China, especially after the new signing of the US-China trade deal, but the million dollar question is, at what price level do buyers in China start pulling back from purchasing because the prices have gotten so high?

"There's a lot of moving parts happening but I think generally speaking there is good reason for optimism that we could see some big improvements in export volumes and consequently some improvements in prices. But the expectations of many people that we'd be dealing with better prices now have just not come to fruition.

"I think it does speak to the importance of kind of a steady disciplined programme of hedging a portion of your production. At this point I would be focused more on the near term.

"By that I'm saying the next month or two months of production, to hedge a portion of that if you haven't already and set reasonable targets that would represent maybe a five to ten percent improvement in prices that would cover off as much as 15 to 20 percent of your production into the spring and summer time frame."

Fulton acknowledges part of the problem right now is that there is still no timeline as to when the punitive tariffs that China has applied on the US will disappear.

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