It’s time to review your marketing plan
We are months away from 2022 and commodity markets continue to be a frantic race. We see a buoyant market with good potential revenue opportunities on the horizon.
As of this writing, a few hog margin crush tools that various advisors are producing are showing potential margins averaging more than $20 per head for the next 12 months. Now is a good time to review your marketing strategy and make any adjustments you may need.
Here are some key things to consider when reviewing your plan:
What is your strategy regarding upcoming price opportunities?
What coverage do you currently have? When and how might you add additional coverage? What tools are at your disposal?
There are many tools in the toolkit that can be used to mitigate price risk, including futures, options, futures, insurance products, and others. It’s important to know what’s available, how the products work, and to use the best tool for the job.
What are your performance goals?
Are you targeting a certain dollar per head or per bushel, percentage return on investment or return on equity? It’s always a good idea to have some kind of targets (goals) so you can measure what current opportunities might look like against the goal. This can help you decide when or how much coverage to add.
Have you reviewed your cost of production?
Whether it’s pork, corn, or soy, it’s a good idea to review this periodically. We are currently in a high inflationary environment and the cost of many items has increased significantly. Have you adjusted for rising input costs (food, utilities, labor, fixed costs) when projecting what your cost of production might look like? What is your production throughput and will this impact your production cost? Take a look at these factors affecting your cost structure to get a clearer picture of what a forward margin opportunity might look like.
Have a plan and review it periodically. Work with your key team members and advisors and be sure to revise your costs if necessary. The market can change quickly, so set goals and assess margin opportunities. While volatility can be frustrating to manage and make decisions on, it can create opportunities for your operation.
Source: Chris Murphy, Compeer Financial, who is solely responsible for and owns the information provided. Informa Business Media and all of its affiliates are not responsible for any content contained in this information asset.
