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Pork producers advised to capitalise on strong forward contract prices

The Director of Risk Management with HAMS Marketing Services suggests Canadian pork producers should be looking at forward contracting with the current market status.

5 April 2019, at 2:58pm

In an interview with Farmscape.Ca, Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, encourages producers to consider forward contracting about 20 percent of production at current prices and another 10 percent for each ten dollar increase in prices.

Despite the current extremely large availability of North American slaughter hogs, hog losses in China due to African swine fever continue to drive markets.

Fulton notes that while hog supplies are abundant, there remains a large appetite for those hogs as well.

"We're seeing extremely volatile markets, really the highest volatility in hog markets that we've seen in probably close to 20 years," he says.

"This largely stems from speculation about how African swine fever is impacting the Chinese herd and whether or not the Chinese are going to be active in replacing some of those losses from global suppliers.

"In this circumstance of high volatility and extremely profitable forward contract prices we think that it's prudent that producers take advantage of some of those prices.

"There are no guarantees that we're going to be benefiting to the degree that the forwards currently price the pork but, that said, we think that producers should be cautious.

"So, if you don't have any price protection on for your 2019 production, we think that stepping into your forward contracts on increments of possibly 20 percent at current prices and then an additional 10 percent on additional ten-dollar increments is probably a prudent approach."

Fulton says it's not that often that we get potential to secure very profitable hog prices right straight through to the end of the year and so producers should be active in managing that.