With so many variables and unknowns facing the U.S. pork industry now, a little free advice can’t hurt. Although these economists admit you may have heard this advice before, here’s what they would encourage you to remember as you take off in 2024.
1. Control the controllables.
“There will always be factors that could impact your operation, but they lie outside your immediate sphere of influence. Avoid the distractions. The current operating environment is when everyday blocking and tackling becomes that much more critical. Continue to focus on operational efficiencies, herd health, and the welfare of your team. Communication with your people, your suppliers and packers (and with your bankers) is essential.” – Christine McCracken, executive director animal protein at Rabobank
2. Explore all the available tools to reduce financial risk.
“Look for ways to reduce financial risk for your operation in 2024 – that includes both hog prices and input costs. In the difficult financial situation many are experiencing today, reducing risk can lead to a better financial outcome. There may not be many opportunities, if any, for significant profitable outcomes. In baseball analogy, this is similar to the coach telling the player to shorten their swing and to put the ball in play with two strikes instead of striking out.” – Scott Brown, an economist at the University of Missouri
3. Live to fight another day.
“Have a risk management plan in place. Understand the difference between hedging and speculating. Take advantage of opportunities when they appear.” – Altin Kalo, chief economist at Steiner Consulting Group
4. Don’t limit your upside participation.
“The scenario we are in is not going to let up before we see a moderation of domestic production. We have already cut capex budgets to zero, deferred any maintenance that is not absolutely necessary, and asked our financial institutions to be patient (for the most part they have cooperated). The part that may surprise people is remembering we are generally characterized by an inelastic demand curve, and when we finally right the balance of economics, things could change in a hurry. This may sound a little odd given the tough times we are in, but if we see and feel a shift in our fortunes, I would counsel producers to not limit their upside participation. This likely means the utilization of options and subsidized insurance in lieu of futures when it comes time to execute. If we hit values that represent profits, the tendency of the producer and the banker will be to not let it get away. There are ways to deliver on that need without forfeiting additional profit margin. If and when this one turns, it could run as sharply to the upside as what we have experienced to the downside.” – Joe Kerns, president of Partners for Production Agriculture
5. Play the long game.
“The long game allows you to compound results. The longer you play, the bigger the rewards. In addition to finances, things that compound include knowledge and relationships. Have you attended an Extension education meeting lately? What you learn could aid in making your operation more profitable. Do you have a strong relationship with your banker, and do you communicate regularly about your situation? Do you have a working relationship with a price risk management advisor, and have you reviewed your goals and objectives with them?” – Lee Schulz, associate professor and extension economist at Iowa State University
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