GUTTENBERG — Doug Reimer believes a team approach is best when it comes to marketing hogs.
Reimer, who farms near here in Clayton County, purchases SEW (segregated early weaning) pigs and contracts them out to other producers for finishing.
For the past several years, the northeast Iowa producer has worked with Chris Wilson, an economist with Atten Babler Risk Management in Galena, Ill., to market those pigs.
“I sell pigs every week. That way we don’t miss the market highs,” Reimer says. “It also helps with our hedging program.”
Wilson adds, “The consistency in the flow of pigs off the farm always gives us something to market into. We pretty much use all the tools we have available.”
Because he buys open-market SEW pigs, Reimer says it is difficult to price anything past six months.
“I may not have pigs because they vary seasonably in price,” he say.
Wilson says very few pigs are sold into the spot market. Reimer contracts with packers, using a formula partially based off prices in the Iowa/Minnesota and other regional markets.
“We aren’t afraid to use options or anything else we need to use,” Wilson says.
With large numbers of hogs scheduled to hit the market over the next year or so, risk management strategies could become even more important.
Lee Schulz, Extension livestock marketing economist at Iowa State University, says even with record supplies, there are currently opportunities to lock in some kind of profit.
“We are seeing profits in the $11 to $12 per head range through spring and summer, and you can lock that profit in right now,” he says. “You can set that floor with put options or just use a straight hedging program.
“Either way, you need to do what you can to minimize risk.”
Schulz says the market is banking on strong domestic and export demand to continue. He says hogs were marketed aggressively over the last two months of 2016, with exports sharply higher.
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Sign Up!He says while most of 2017 looks somewhat profitable, the last quarter is much bleaker.
“There are opportunities now to limit your potential losses,” Schulz says. “Take those profits you got earlier in the year and limit what you might lose in the fourth quarter.”
He says expansion is expected to continue, partially fueled by the prospect of additional packing capacity in Sioux City and Michigan this summer.
Wilson says regardless of hog numbers, a strategy such as Reimer’s should offer a balance of protection and profitability.
“One thing Doug does well is maintaining his consistent approach to marketing,” he says. “The marketing seems to even out at the end of the day, with gains and losses and avoiding those big downturns in price.”
Reimer says having someone like Wilson on his team helps make him a better marketer. He encourages producers to look for someone who can help them navigate through any rough waters.
“Find a person you can work with, someone who you are comfortable with and trust,” Reimer says. “The two things you need to do are being consistent with your marketing, and protect your risk as much as you can.”
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