Swine Industry Update: The Roller Coaster Ride Continues

Mark Greenwood
September 2008

Hog Prices are Just as Wild
The cash hog market has been almost just as volatile. Cash hogs hit nearly $90 only about 10 days ago; today cash hogs were trading in the low $70’s. Hog revenue has risen nearly $20 a head in a two week period and then fallen over $30 in another two week period. If you look at the pork cutout report over the last five reporting days you can see the drop in value over this time.

Volatility will become the Norm
During this time of volatility it is natural to move to a state of shock and freeze because it’s difficult to react. I have told clients that I think this state will become the norm. We must all become comfortable handling volatility and become more aware of all the factors in the marketplace. I wish I could believe the market will correct itself, but in agriculture today I think volatility is here to stay.

So, what should I do?
When I look at successful companies today, I think there are certain things they do better than anybody else.

• They are a student of the business. They look at all the factors in the marketplace and make sound risk management decisions. The information they look at today is also much more than what it was a year ago. Agriculture is a global market. It is vital to understand all of the factors in the world today that can affect global ag production.
• They stick to a sound decision plan and don’t second-guess themselves. This is probably the hardest thing to do in today’s market. Your decisions are not going to be right 100% of the time, but you must have a disciplined approach to making risk management decisions for your operation.
• You must be good at production. This is like blocking and tackling in football – you must master the basics to win. Keeping your eye on production with this level of market volatility is still the most important factor to swine producers. If production is low, it can put you further behind in a very tough environment.