Pork Producers Advised to Look at Forward Contracting Fourth Quarter Hog Production

Farmscape for February 22, 2019

The Director of Risk Management with HAMS Marketing Services is advising pork producers to look seriously at forwarding contracting as much as a third of their fourth quarter production at current prices.
Since the start of the year abundant live hog supplies combined with the impact on export demand of Chinese and Mexico tariffs on U.S. pork have been pressuring live hog prices.
Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says pressure coming from the cash market is showing up on the futures market.

Clip-Tyler Fulton-HAMS Marketing Services:
There's not a great deal of potential I think in the forward prices for the summer months, for the spring and summer time frames.
We've seen prices erode well over 10 percent over the course of last two to three months or so however we've not seen the same pressure on the deferred months.
By that I'm talking about the fourth quarter.
Starting September, October, November, December there's actually still some very good potential for locking in some decent value for fourth quarter production and we know that fourth quarter production is typically when the lowest prices are seen.
I think that comes from the fact that the market is still leaving in a risk premium relating to the possibility of sending more pork to China.
It's far from a sure thing and I think that given those decent values that are currently being offered out there it would be prudent I think for some producers to take some protection on as much as a third of their fourth quarter production at current values.

Fulton says, while domestic demand for remains steady the export markets are not performing as well as we would have hoped.
He says with retaliatory Mexican tariffs on U.S. pork still in place and with no end in sight to the U.S. China trade dispute, the market is factoring in skepticism that we're going to have a resolution to some of these trade issues.
For Farmscape.Ca, I'm Bruce Cochrane.

       *Farmscape is a presentation of Sask Pork and Manitoba Pork