The Agriculture Financial Services Corporation reports a new hog price insurance program introduced in Alberta is attracting attention in other regions.
The Hog Price Insurance Program offers Alberta market hog and weaner pig producers an opportunity to secure a minimum price for a future market date.
Bill Hoar, the livestock price insurance coordinator with the Agriculture Financial Services Corporation, explains producers have the option to purchase an insurance policy based on a forecast future hog price.
The policy lengths that we’ve got set up are from two months out to ten months into the future.
When the policy expires the coverage purchased is compared to the settlement price that reflects the monthly average price of market hogs in Alberta.
From there it’s pretty simple to just do the math.
If the settlement price is below the insured price a payment of the difference is made.
The coverage levels are calculated using market driven data such as the CME lean hog futures and the foreign exchange between the U.S. and the Canadian dollar is also calculated in there.
The producer can go on line, look at the premium table, see what that cost is per 100 kg of dressed product and decide based on that farmer’s break evens or based on that farmer’s margin that he would like to protect he or she can pick that particular policy for that particular length.
The important distinction with this is this really just sets a floor price.
It’s protecting in the event the prices do decline and go down below that insured price.
That’s where the policy and the program will kick in and pay those dollars back up to that insured price.
Hoar says the program could potentially be expanded to other commodities and to other regions.
He says there’s a lot of interest from outside of Alberta in seeing how this program is working and if it’s meeting the needs of Alberta producers.
Source: Farmscape.Ca
