The director of risk management with H@MS Marketing Services says the decision by Maple Leaf to allow pork producers to deliver lighter weight hogs its Brandon hog slaughtering plant will make it easier for them to cope with dramatically higher feed costs.
Due to the drought experienced this year in the U.S. mid-west feed costs have increased by 60 to 70 percent over the past three months or so.
Prior to the feed crisis Maple Leaf implemented a heavier grid but, to help its contracted producers in Manitoba and Saskatchewan cope with the higher feed costs the company is offering the option of reverting back to the previous lighter grid.
Tyler Fulton, the director of risk management with H@MS Marketing Services, notes feed is the biggest cost associated with raising pigs so adjusting finishing weights will offer a little more flexibility.
What it does is, it really doesn’t do anything to address feed costs per say but what it does do is it allows producers to minimize the losses on those hogs.
There’s a certain dollar amount that relates to what it costs per pound of gain and, as it sits right now, those extra pounds that producers would be adding on to their hogs is effectively losing them more money so, by getting those hogs out of the barn earlier albeit at a lighter weight, they effectively are not incurring the loss that they would otherwise be because they’re not putting the feed into the animal that they would be had that animal gone let’s say a week or two weeks later at a heavier weight.
It’s a coping mechanism.
While feed costs will be minimized your revenue will also come down significantly as well because obviously you’re not going to be adding those extra pounds of revenue that you would be normally paid on.
Fulton says if’s all about cash flow and if you take away some of the penalties typically associated with shipping lighter hog weights it will make it easier for producers to cope.
