Prudent Incremental Approach to Forward Pricing Recommended

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Farmscape for December 2, 2021

Full Interview 6:32 Listen

The Director of Risk Management with HAMS Marketing Services is recommending a prudent approach to forward pricing hogs for the first half of 2022. Although cash hog prices continue to face the price pressure typically experienced in the four quarter, from a futures standpoint, things still look very good. Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says with the U.S. Thanksgiving holiday, which typically marks one of the lowest levels of cash pricing over the year behind us we’ll hopefully see some improvements and he recommends a prudent incremental approach to forward pricing.

Clip-Tyler Fulton-HAMS Marketing Services:
With so many moving parts out there, it seems unlikely that one is able to call the market and key in on the one factor that’s really going to make the difference. There’s just so much that’s so dynamic and so much we don’t know until it happens. With that in mind, we think taking an incremental approach in pricing hogs, especially for the first half of 2022 would be prudent. Covering at today’s dollar values, something in the neighborhood of around 20 percent to start and building into that on increments if the price continues to make some improvements.

Fulton says we’re looking at scenarios where pigs are trading at close to 200 dollars per head on average across the first six months of the year which, despite the higher feed costs, is a good situation to be in. He notes the cash market has seen mixed influences with a lot of factors at play and right now we’re seeing a split in the cash market with prices for contracted hogs holding up better than those being delivered to the packing plants without any contracts in place.

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