Hog Producers Managed Risk Well in Trying Times

Despite record feed costs last summer and a big sell-off in hog prices in September – there has been little change in projected hog production. Why hasn’t there been a bigger toll among pork producers? Steve Meyer – President of Paragon Economics – says more producers are managing risk through forward contracting…

“In doing so they manage both sides of that profit equation, both cost and prices. Some of those withstood the huge losses of 2008 and 2009 and came out of that in decent financial condition even though the industry it self was hurt very very badly. In addition, that same practice has been carried on by larger and larger wider proportion of the pork producers in the last few years. Some avoided some of the losses that our models predicted and had told us that losses were very severe.”
 

So Meyer says pork producers came into the fall in relatively decent financial condition. As a result – sow slaughter has held steady…
 

“These guys are hog producers and they will be everything that we will have a decent corn crop this year, costs are going to go down and they can survive another year then thrive into 2014. There are huge amounts of risk being taken. Because of the reduction of financial resources and the risk that, based on what the drought looks like right now, that we will not have as good a crop again next year as what we need.”
 

Meyer says the swine industry is betting on a change in U.S. weather and a continued strong export situation in 2013.


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