Farmscape for February 3, 2021
The Director of Risk Management with HAMS Marketing Services is advising pork producers to take an incremental approach over the next few months to forward contracting.
In western Canada we've seen more pork processors making reference to the carcass cut-out value in their contracts and a better than usual improvement in the pork cut-out value since the Christmas/New Year holiday period has allowed them to rationalise higher prices.
Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says pork demand remains solid and we've seen the futures and forward contract prices move up to the highest levels we've seen over the last ten months.
Clip-Tyler Fulton-HAMS Marketing Services:
I think the best approach is an incremental one where they do smaller portions of their production and when we see a further increase in prices then they keep adding to that position.
It's kind of the concept of dollar cost averaging where they increasingly get more protection as the price goes up.
Alternatively, if the market doesn't continue to rally, what we're generally recommending is that in a month or two months if we don't see a lot of further support then maybe taking an additional 20 percent protection at that point would be prudent if they at that point had only taken 20 to 30 percent.
It's an incremental approach and producers are taking advantage of the programs that are out there.
Fulton says the futures markets are at their peak right now and producers are very much taking advantage of the profitable prices they represent.
Despite the high input costs he believes there's still some margin there, in particular in the summer months.
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