Farmscape for February 27, 2020
The Director of Risk Management with HAMS Marketing Services is recommending a disciplined structured approach to building protection for live hog prices.
Continued increasing U.S. slaughter hog production combined with growing trade uncertainty resulting from Coronavirus have offset the potential positive impact of increased pork demand resulting from shortages caused by African Swine Fever.
Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says most analysts expected to see year over year number increases but it was generally thought that increased export potential would possibly overcome those increases.
Clip-Tyler Fulton-HAMS Marketing Services:
Because we've been running at production levels that are a lot closer to full capacity utilization than was anticipated, I think that's really kind of kept a lid on cash hog prices and in particular those hogs that weren't previously contracted have really seen depressed prices.
I think this is the time where producers with a plan will really realize the benefits of that plan.
You have a plan and you stay disciplined to that plan, and by a plan I mean a structured approach to gaining protection for your hog prices and something reasonable, something that is not to extreme and considers the whole picture which includes the heavy supplies here in North America, the obvious hole that develops from African Swine Fever in China and other countries and now the new dynamic of the Coronavirus and its impact.
I think that producers should probably have lower expectations than what they did three months ago just strictly due to the fact that Coronavirus has the potential to really disrupt normal market signals.
Fulton says there are creative ways for processors to accommodate higher slaughter hog numbers but he acknowledges we are approaching a level where there is reason for concern during the fourth quarter of 2020.
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