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A Whole Farm Approach to Risk Management for Hog Producers Eric Olson

A Whole Farm Approach to Risk Management for Hog Producers Eric Olson. Discussion. What is Risk Management ? Back Ground Why? Strategy for your Farm. Definitions. Entrepreneur – A person who starts a business and is willing to risk loss in order to make money

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A Whole Farm Approach to Risk Management for Hog Producers Eric Olson

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  1. A Whole Farm Approach to Risk Management for Hog Producers Eric Olson

  2. Discussion What is Risk Management ? Back Ground Why? Strategy for your Farm

  3. Definitions Entrepreneur – A person who starts a business and is willing to risk loss in order to make money Risk – Possibility of a Loss Management – Act or skill of controlling and making decisions about a business

  4. Traditional Focus • Production • Pigs/sow • Feed Conversion • Bio-security • Grow it and it will work out

  5. Five years of Change • Understanding Changes in the Industry • Predictability • Unpredictable Events/Trends • US Dollar • MCOOL • Ethanol • H1N1 • Drought

  6. Strategy Need a Goal – Target Know your Cost of production Know your Cash needs Plan ahead

  7. Strategy Protect Margin Make Active Management Decisions

  8. Marketing Outlook Next 12 Month Outlook – Average Prices Revenue $162.52 Feed Cost $102.23 Fixed Costs $ 54.70 Margin $ 8.67 Depreciation $ 11.00

  9. Information Information Fruit World is Small

  10. Information is KING • Right Information • Hog Prices • Grain Markets • Political Trends • Currency Outlook • Need to Understand • Why prices are where they are today • Where they are going

  11. Risk Management Historical success in cash market Not necessarily a predictor for future success Market offering a profit

  12. Conclusion • Each producer needs to manage risk according to their own farm situation • Make a Goal for your farm • Know your cost of production, ability to make informed marketing decisions • No action is a decision • MARGIN - Locking in forward prices on hog prices should be matched with contracts on feed, etc. • MAKE ACTIVE MANAGEMENT DECISIONS

  13. Thank-you! Questions?

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