HAMS Marketing Services Recommends Setting Price Targets When Watching for Forward Contracting Opportunities

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Farmscape for July 7, 2021

Full Interview 9:30 Listen

Given a recent softening of live hog values, HAMS Marketing Services is advising a prudent approach to forward contracting into the fall and winter months. Although live hog prices have been strong, they have softened over the past couple of weeks. Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, recommends setting targets when forward contracting, not necessarily trying to pick off the highs but rather securing good profitable prices on hogs out into the winter months, if the profit is there.

Clip-Tyler Fulton-HAMS Marketing Services:
About two weeks ago we saw a pretty dramatic decline in cash markets from the highs, from some of the record highs that we’ve seen, definitely some of the highest levels that we’ve seen in the last five years. That said, we’ve seen a little bit of a recovery just in the last week and we’re still dealing with good profitable prices right straight through the summer months and into the fall.
We might come under some pressure from a profitability standpoint in December despite seasonally strong prices being represented in forward prices and that comes from the fact that there’s just a lot of price pressure on the feed side of the equation that is really squeezing margins so there is some question there. We’re definitely down from the highs on the winter months but I don’t think we can rule out a recovery in forward prices at least back to levels seen a couple of weeks ago before we saw the larger decline.

Fulton says, given that we’ve come off of our highs, producers who have room to secure profitable prices into the fall should consider locking in 30 to 40 percent of their production. He says utilizing targets is a really good tool because, during a short volatile stretch, we can hit levels that are not fundamentally supported which can trigger a short-term price rise and an opportunity to secure prices that would be profitable.

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