The Director of Risk Management with HAMS Marketing Services says early indications are that 2021 will be a much more profitable year for pork producers than 2020 was.
COVID-19 was the dominant factor influencing live hog prices over the past year.
Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says we know from 2020 that, in the event we have disruptions in the supply chain, it has vey negative consequences and June, July and August were examples of that where prices were lower than 140 dollars per hundred kilograms in some weeks resulting in losses of 20 to 30 to 40 dollars per pig.
I think there’s some early evidence that suggests that 2021 will be a lot better. We think that the breeding herd is going to be down substantially. You would that after a tough year like 2020 that there might be some pullback in production gains.
The latest Hogs and Pigs Report kind of indicated that and I think that, if current forward prices are representative of where cash markets will be then I think we can expect to see a profitable summer. Right now producers are very active in hedging the summer months and they can lock it in at better than 200 dollars a pig. By any measure that’s a good level to be hedged at and I think it’s a great indication that we might be able to recover some of the equity loss that we saw last year.
~ Tyler Fulton, HAMS Marketing Services
Fulton says COVID is not completely behind us and we could still see some negative impacts but there is room for optimism. He suggests producers need to be prepared to cover off some of their price risk by taking forward contracts at hopefully profitable levels.
