The goal of Commodity & Ingredient Hedging (C&IH) is well-focused: improve the prices of commodities that agricultural interests, including pork producers, pay for inputs and receive for products they sell.
Hog Margin Management Service was launched in 1999, says Managing Director Perry Iverson, to provide online resources and personal consultations to maximize results.
Over the years, many pork producers have enlisted the services of this Chicago firmâ€™s margin management program to reduce risk.
Iverson says the best results are achieved when producers take a longer view of hedging opportunities, rather than just one yearâ€™s experience.
Over time, hedging can help avoid those big dips in the hog market and those big cuts in producersâ€™ equity positions, he notes.
This volatile hog market has been compounded by the softening of the overall economy.
That has meant some change in strategy, says David Ward, senior risk manager. C&IH has been working even closer with the producer client and his lender to review balance sheets and secure proper hedging opportunities.
C&IH analysts are looking to the summer and fall of 2009, and even to the first quarter of 2010, where there are better margin opportunities for pork producers, he says.
As long as the lender can be assured the producer has a good margin management program that protects hog revenue opportunities, that lender can feel confident that a loan will result in a positive return for the operation, Ward explains.
Ward says long-range opportunities are available that will help protect the producerâ€™s balance sheet.
Iverson says typically the potential client will be given a demonstration service, and if interested, given assistance in collecting the type of information needed to develop a margin management program for their operation.