NPB: Meyer on the Markets

As pork producers are seeing market price increases, they are also experiencing increases in input costs, such as corn and soybean meal. According to Steve Meyer, consulting economist for the National Pork Board, there are three marketing factors producers should be focusing on during the coming months.

With the current break-even running at about $80, Meyers says to focus first on the cost of inputs.

“Number one is put a lid on your costs. This thing could get worse. It looks like it’s gotten as bad as it can get, that’s not the case, it could get worse. So, do something now to put a lid on your costs. As I’ve pointed out many times in the past, sometimes you have to accept a small disaster to keep a bigger disaster from happening. So, that would be my first action here.”

Meyers goes on to encourage producers to examine their marketing agreements to ensure they are up-to-date and based on the best available pricing information.

“Look for every opportunity in the coming year, to try to make a long-term deal on pricing your hogs off of something other than the negotiated market. The negotiated market has proven that it has reached the point where it’s not dependable and the bargaining power on this in these contractual negotiations is likely to swing back to the producer, so look for that opportunity.”

Meyers says to be aware of the current increase in market hog prices, determine your break-even cost, and protect your potential profits.

“I would be looking to put some floors under some of these prices for hogs. As we look out given where the futures market is, and you know that costs you something, you have to pay premiums for options to do that. So, it’s not free. But again, I thank you can lock in some very good prices that keeps you in the black for this year at the present time and still leave some topside potential with if this thing runs, you know, if cash hogs go to $100 you can at least participate in that.”

Meyers says there are a number of factors at play in the current hog market, including recovery from COVID markets, fear of a short South American crop and China’s move to modern production farms.

Producers can find current pork economics and market reports on www.pork.org or by calling the National Pork Board at 800-456-7675.