Farmscape for August 21, 2018

Hams Marketing Services is advising pork producers to consider forward contracting to mitigate the extreme volatility in the hog market.
A range of factors, primarily large slaughter hog numbers, the impact of tariffs on the cash market and now the impact of African swine fever in China on the futures market are causing huge shifts and a great deal of uncertainty.
Tyler Fulton, the Director of Risk Management with h@ms Marketing Services, says the next six months will be one of those periods where producers are just trying to preserve capital and cut costs.

Clip-Tyler Fulton-h@ms Marketing Services:
Things are extremely tight and the move of the cash market over the course of the last three weeks or so has only exacerbated that situation.
I think the decline in the cash has happened a whole lot quicker than most people had anticipated and that's kind of sucking out some of the reserves that producers may have had.
So things are pretty tough.
The one recommendation that's probably out there right now is that, the market has actually recovered in some months close to 20 to 25 percent of their value over the last seven to ten days or so.
We think that actually represents a really good opportunity to hedge, just based on the fact that we think the heavy supply is going to be the certain aspect of this market and that there's still a great deal of uncertainty on the demand side.
As it sits right now forward prices represent only a discount of about 10 dollars from a three year average price from when you're looking at the September through January time frame which we think in the context of these market fundamentals are actually decent value.

Fulton says, when you compare the forwards to the cash market, if at this time of year, you can forward contract at a price higher than the current cash market it represents an opportunity because we know we're going to be dealing with 10 to 12 percent more supply in two months.
For Farmscape.Ca, I'm Bruce Cochrane.

       *Farmscape is a presentation of Sask Pork and Manitoba Pork