The Director of Risk Management with h@ms Marketing Services is advising pork producers to consider increasing the percentage of production they have forward contracted.
Despite the fact that the United States is approaching record high hog production levels, U.S. cash hog markets have been showing signs of recovery fueled primarily by the ramp up of new U.S. slaughter capacity which has forced packers to compete more aggressively for hogs.
Tyler Fulton, the Director of Risk Management with h@ms Marketing Services, says the recent market improvement makes this an appropriate time to reevaluate the level of protection producers have in place.
I think that producers that are not comfortable with the protection levels that they have already taken have an opportunity to possibly put something in for that December through February, March time frame.
With the strength that we’ve seen in the cash market, futures values have actually appreciated so they’re sitting at pretty close to their three to four month high and that’s a pretty good opportunity given that we still have a lot of production that we need to deal with and there’s a lot of uncertainty on the export front.
With that in mind, if producers have less than 30 percent coverage for the winter months, they might consider adding some more protection, maybe with targets priced at about eight to 10 dollars higher than what current forward contract values are currently valued at.
~ Tyler Fulton, h@ms Marketing Services
Fulton says projections contained in the USDA’s Hogs and Pigs Report, released at the end of September, are coming to fruition. He acknowledges it’s still early in the fourth quarter but it’s generally understood that we can expect about three percent more pigs until the end of 2017.
