The Rural Voice, 2002-01, Page 49PERTH ifRk
County Pork Producers NEWSLETTER
Jim Van Herk, President
519-595-4863
• The Rural Voice is provided to Perth
County Pork Producers by the PCPPA.
Are you pro -active or in -active in your marketing?
Any opinions expressed herein may
not necessarily reflect the views of
the Perth County Pork Producers'
Association.
Early winter is a time for
reflection on the previous and time to
look forward to the next year.
Farmers look back on production
methods, weather, crop yields and
livestock production and try to (earn
from the past. Cash croppers look at
marketing results and learn for the
future. But do livestock producers?
There are two types of market
plans — Proactive or Inactive.
Pro -Active — looks at CME
Futures or Options, Packer Contracts,
Ontario Pork future pricing, or the
option of cash.
In -Active —thinks — I ship every
week so I'm happy with any price — I
have enough equity so I don't bother
with risk management.
CME Options — give a producer
the right to sell but not the obligation
at a specific price for a certain
premium — (kind of fire insurance in
reverse; with fire insurance you bet
you will have a fire and insurance
company takes your bet (premium)
and bets you won't have a fire. If you
have a fire you win the bet and they
pay insurance — no fire no insurance
PERTH COUNTY PORK
PRODUCERS
Annual Meeting
January 24
Army and Navy Hall,
Stratford
Tickets available from
Directors.
— they keep premium). Same with
hogs, you believe price will be below
your price selected (strike price) and
pay a premium (insurance) to the
options seller who believes price will
be higher. If futures price ends up
below your strike price the difference
is made up by the option seller.
Packer contracts are available
from Ontario packers and guarantee a
price for certain delivery periods.
There is usually extra basis figured in
to cover packers risk.
Ontario Pork forward contracts
can be a good risk management tool
if used wisely. Some producers have
complained about wide basis levels
on these contracts, but have not done
their homework.
CME futures are settled against
the lean hog index and therefore cash
and futures must come together on
the tenth day of the delivery month.
Therefore, basis should be close to
zero. This gives a producer the
opportunity to sell one week's
production for a delivery month (i.e.
Feb., April, May) for a total of eight
weeks out of 62; with little chance of
basis risk. By shipping every two
weeks a producer could hedge up to
30 per cent of annual production.
There is no upfront fee and any
number of hogs can be hedged.
Two questions I've had for years —
still no answer.
Why is there crop insurance for
grain and oil seeds but not production
insurance for hogs? Are soybean
aphids different from TGE; is a
drought different from PRRS, is poor
weed control different from
respiratory problems? Why can't I
buy insurance for 80 to 90 per cent
coverage on livestock production?
Why do we have Market Revenue
(Grip) for grains but not livestock?
Eighty per cent coverage of previous
three or five years' prices would give
a bottom to prices and would be a
step in the right direction for
livestock producers. Countervail is
simply a cop-out.0
— Submitted by Jim Van Nes
PERTH COUNTY PORK
PRODUCERS'
PORK PRODUCTS
• Smoked Pork Chops • Fresh Pork Chops
• Stuffed Loin Chops • Smoked Sausage
• Smoked Cheddar Sausage
• Bacon Burgers • Teriyaki Pork Steaks
• Vittorio's BBQ Sauce
AVAILABLE FROM:
Steve Hulshof (Kinkora) 348-8167
Martin van Bakel (Dublin) 345-2666
Walter Bosch (Monkton) 356-9000
Ted Keller (Mitchell) 348-9836
JANUARY 2002 45