In light of sharp drops in the futures, the Director of Risk Management with HAMS Marketing Services recommends a disciplined approach to forward pricing.
A combination of record U.S. hog production and the shortened Thanksgiving-Christmas holiday slaughter schedule, during what’s typically seasonally the highest production time frame of the year, is being blamed for a dramatic reduction in North American live hog prices.
Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says this has resulted in downward pressure on the futures market.
Forward prices have really come down sharply in line with the cash market. I would expect that we’re going to continue to see some huge volatility and so I would think that we will get a better opportunity to do some forward pricing into 2020.
Several producers have some protection into that time frame that are at good profitable levels. To be fair things are projected to be profitable from April or May of 2020 and beyond. So really it’s just about taking incremental increases in portions of your production and actually pricing them at ever increasing profitable levels.
That means pricing 10 percent of your production at 10 percent higher than the current prices and then again the next ten percent at probably some increment higher than that and just stay disciplined with that plan of adding protection as the prices improve.
~ Tyler Fulton, HAMS Marketing Services
Fulton notes the whole North American herd has been lost in China alone due to African Swine Fever and that overlooks the losses in Vietnam, the Philippines and other places. He suggests we need to figure out every way possible to lower the barriers from the United States and Canada into Asia to access some of that market to get a more equitable balance between the two continents and between producers and packers currently in North America.
