In a volatile market, Mark Greenwood believes pork producers have to be realistic when it comes to returns.
Greenwood with AgStar Financial Services in Mankato, Minn., told producers at the recent Iowa Pork Congress here the roller coaster ride they have the past year may continue.
“Are we ever going to settle into a range?” he asked. “I don’t think so. I think this is where we’re going to stay.”
Because of that, Greenwood said producers have to create goals for their operations. He suggested they put it on paper, perhaps creating a mission statement for the farm and sharing that information with their family.
“I really believe you need to start having a mission and a goal statement for your operation, and you need to stick to it,” Greenwood said. “You have to establish set parameters and be willing to live with them.”
And those goals, he said, need to be realistic. “You need to set a realistic goal for an acceptable rate of return for your operation,” Greenwood said. “If you tell me I can get a 20 percent return on my 401(k), I would be thrilled. But, you better have a very, very strong balance sheet to ride the market, and not many have that right now.”
Eliminating risk is a goal of all producers, he said. But, some risk-management methods are not for everyone, he added.
“Is hedging for you? Maybe not. I would suggest you locate a trustworthy market adviser before you decide what you are going to do.”
He said producers also need to be honest with themselves when determining production costs.
With today’s global market, Greenwood said producers need to recognize that fact and understand what happens overseas affects what happens domestically.
“We are in a global market, and we are clearly an industry that is dependent upon exports,” he said. Information is also readily available, but Greenwood cautioned producers to take all information with a grain of salt.
“The information you get is only as good as the source, but you also have to understand that it’s old information by the time you get it. And, it’s often filled with someone else’s bias.”
Greenwood said producers need to make sure they are properly educated and informed.
“Be a student of your business. You have to be passionate about it. You have to understand how to make better decisions going forward.”
Every producer should have a daily checklist of information, Greenwood said. Among those items — national hog prices, pork cut-out values, daily estimated slaughter, negotiated daily prices and carcass weights.
He said hog prices may be moving up, but there are some warning signs afoot for an industry dependent upon exports.
“If we are hoping China is going to be our savior with exports, we shouldn’t. They are clearly trying to feed their own people. It’s the same with Russia. We have to have open market access to areas, and right now, Russia is for the most part banning pork and poultry.
“If we can’t export poultry, that is going to put some pressure on pork prices this year.”
iowafarmer.com
Source: newsroom - meattradenewsdaily.co.uk
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