Is forward pricing the answer for pork producers amid COVID-19 troubles?

The Director of Risk Management with HAMS Marketing Services says, amid the market uncertainty being created by COVID-19, forward pricing is an option to consider.
calendar icon 23 March 2020
clock icon 3 minute read

Market disruptions resulting from the turmoil surrounding COVID-19 and uncertainty over the ability to move pork into those regions where pork prices have been highest and pork supplies have been limited have been the biggest factor influencing North American live hog prices.

Speaking to Farmscape, Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says producers need to remain disciplined.

"It's a new reality that we find ourselves in and I think that producers should probably lower their expectations and simply take some of that risk off the table for some of the time frames that they don't yet have priced," says Fulton.

"I'm not saying you should do a large percentage of your planned production, but into the third and fourth quarter of this year, when we expect that hog supplies are still going to be large and we might start seeing some constraints with respect to the processing capacity on those animals, it might start to make some sense to price in 25 percent of your production.

"Maybe not at absolute current prices but marginal improvements, something in the neighbourhood of around a 10 to 15 dollar appreciation, so 10 to 15 dollars higher than current prices for the fourth quarter per CKG.

"That's a relatively modest recovery to start actually getting some greater protection just simply to take some risk off the table.

"Even if there's not profits to be had there, at least there's some ideas that the losses won't be catastrophic."

Fulton says, amid all the uncertainty, the most prudent thing pork producers can do right now is to continue doing what they've been doing.

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