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 Risk – Possibility of a Loss Management – Act or skill of controlling and making decisions about a business

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

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

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

Strategy Protect Margin Make Active Management Decisions

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

Information Information Fruit World is Small

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

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

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

Thank-you! Questions?