Price Risk Management

By Perry Iverson and Gordon Malarkey

Commodity & Ingredient Hedging, LLC, a Hog Margin Management Service based in Chicago, IL, has partnered with the National Pork Board to create an interactive teaching tool for producers. In this session at P.O.R.K Academy the teaching tool was to be demonstrated for producers. Below are characteristics of the computer-based training tool and educational consulting services that can be offered to assist producers in managing margins in their operations. CIH and National Pork Board will be sponsoring educational events throughout 2001 to assist producers in this area of marketing. Please contact CIH or National Pork Board for more information.

A unique tool for indicating the net margin of a hog producers enterprise has been developed. This educational tool does not only consider feed costs or product price but is used to improve knowledge of the enterprises whole worth as the producer looks ahead for four quarters.

Actual values are gathered across the whole operation, which includes net feed costs and net product values. This product allows a producer to accurately determine and constantly monitor four quarters of his or her net operation profit margin.

A complete report of the net operation profit margin is delivered weekly for each of the four quarters ahead. This comes in a rich, colorful easy-to-follow chart and table format for each of the four quarters. For each quarter, it includes a perspective on where the operation is now, where it has been for the year, as well as historical studies for the operation.

The education sessions and consultation services provided by CIH provide a one-on-one basis to systematically instruct and evaluate what contracts are available to producers to manage this margin over the year, including how to use packer contracts when appropriate.

Producers will be informed of the accurate indication of the operation’s net margin and a year’s worth of regular consultation on what margin management choices to evaluate and use.

This tool and service has been tested, endorsed and is actively being used now. To learn more you can contact us by phone at 312-347-5103, or at our web site at cihedging.com, or contact National Pork Board at 515/223-2600 for an educational workshop they will be sponsoring.