A Whole Farm Approach to Risk Management for Hog Producers

Eric Olson

Discussion

What is Risk Management ?

Back Ground Why?

Strategy for your Farm

Definitions

Entrepreneur – A person who starts a business and is willing to risk loss in order to make money

Risk – Possibility of a Loss

Management – Act or skill of controlling and making decisions about a business

Traditional FocusProduction- Pigs/sow- Feed Conversion- Bio-security- Grow it and it will work out

Five years of Change

• Understanding Changes in the Industry

• Predictability

• Unpredictable Events/Trends• US Dollar• MCOOL• Ethanol• H1N1• Drought

Strategy

Need a Goal – Target

Know your Cost of production

Know your Cash needs

Plan ahead

Strategy

Protect Margin

Make Active Management Decisions

Marketing Outlook

Next 12 Month Outlook – Average PricesRevenue $162.52Feed Cost $102.23Fixed Costs $ 54.70Margin $ 8.67Depreciation $ 11.00

Information

Information Fruit

World is Small

Information is KINGRight Information- Hog Prices- Grain Markets- Political Trends- Currency Outlook

Need to Understand - Why prices are where they are today- Where they are going

Risk Management

Historical success in cash market

Not necessarily a predictor for future success

Market offering a profit

Conclusion- Each producer needs to manage risk according to

their own farm situation- Make a Goal for your farm- Know your cost of production, ability to make

informed marketing decisions- No action is a decision- MARGIN - Locking in forward prices on hog prices

should be matched with contracts on feed, etc.- MAKE ACTIVE MANAGEMENT DECISIONS

Thank-you!

Questions?