The Director of Risk Management with h@ms Marketing Services says the increasing value of the Canadian dollar is the biggest factor affecting the profitability of Canadian pork producers right now.
North American Hog Markets have held steady over the past couple of months, increasing slightly during the past week or so.
Tyler Fulton, the Director of Risk management with h@ms Marketing Services, says the value of the dollar has had the biggest impact on Canadian hog producers.
We’ve seen approximately $20 per CKG move out of cash and forward prices as a result of the Canadian dollar appreciating the 10 cents that it has over the course of the last 3 months so it’s a major impact in price over a relatively short period of time, especially when there really hasn’t been any significant price moves in terms of U.S. cash hog prices.
We’ve seen an erosion in prices but it’s almost exclusively due to the higher Canadian dollar.
There’s no doubt that Canadian producers have lost some of their advantage over the course of the last 3 months but I would say that profitability is still good, probably better for Canadian producers than it is for their American counterparts.
The concern probably lies more on the fall months where the weakness in the Canadian dollar has had the effect of dropping some already low forward contract prices even lower so there may be some weeks where we’re getting close to a break even level for many Canadian producers. ~ Tyler Fulton-h@ms Marketing Services
Fulton suggest keeping an eye on those deferred contract months, specifically October, November December and even January, February of 2017.
He says hedging at current values is probably prudent in the context of what’s expected to be a heavy supply of pork as well as beef and chicken.
