April 2023 - Strategy FINAL - Flipbook - Page 16
Marketing
Marketing Strategies
for Pork Producers
Brian Stevens
President,
Big Stone Marketing, LLC
Revenue is a key metric for
a producer to be successful in
their pork production enterprise.
As we consider strategies for
success, I’d like to highlight a few
key tactics producers can adopt
that, in the long run, will help to
improve revenue. Some of these
are basic and some of you will
say, “yea, duh,” but it never hurts
to review the basics.
Understand the markets
The first thing you should
understand is all of the different
“markets” that relate to your
farm business. For example,
do you understand mandatory
price reporting for the Western
Cornbelt hog market, the
National hog market, the CME
Index, and the Pork Cutout?
Before you sit down to negotiate
any hog procurement agreement
with your packer/buyer, you will
be at a disadvantage if you do
not understand these markets in
detail. Key questions to ask are
how are they derived, what are
the differences, who does them,
why do they sometimes say ‘not
published due to confidentiality’,
and are they audited? You should
also understand the details on
the grains, particularly corn and
soymeal markets.
16
PIPESTONE JOURNAL
Brian Stevens grew up on a farm near Blair, Nebraska and attended
the University of Nebraska pursuing a degree in Animal Science. Brian
joined PIPESTONE in 2010 and is currently the President of Big Stone
Marketing and an owner within the company.
Know your buyer(s)
The second strategy that is
overlooked is to know all of
your regional packer buyers. It
is easy to develop a relationship
with your local country buyers,
but I also suggest to get to
know the head buyers in your
area. Ask them questions and
try to understand aspects of
their business that you don’t
understand. There are not very
many companies left to buy
your hogs, so be respectful and
don’t burn bridges. We learned
during COVID that when plants
are going through shutdowns,
having more than one packer
agreement was beneficial and
allowed producers to get their
hogs harvested. I firmly believe
that every producer should have
a minimum of two agreements
with different packers; I like three
and maybe even four agreements
better depending on your
individual situation. This helps in
situations where shutdowns could
occur - weather (tornado or fire
damage, etc.), foreign animal
disease, or COVID are a few
examples. Another advantage
is that it allows you to diversify
your pricing, if you can negotiate
hog procurement agreements
that have differentiation.
This is especially true today
when attributes like open pen
gestation, Prop 12, and Duroc
sired all have different value
opportunities between the
different packers. Not one market
seems to stand the test of time so
diversify your pricing and you will
always be half right.
Implement risk
management
The third tactic is to implement
a consistent risk management
strategy that allows you to ‘crush’
your hogs to a consistent profit
margin. Today I deal with a third
of producers who do a great
job, a third that do a mediocre
job and a third that don’t do any
risk management. In this world
of extreme volatility you really
need to adopt risk management
strategies for your business.
Remember consistency is the
key. So often I see producers
who have fallen into the trap of
trying to hit the top of the market
and are left with no coverage
when it crashes. Focus on the
crush margin and lock-in your
profit margin when they hit levels
you’ve already predetermined.
For example, when the markets
allow you to crush $10/head
maybe you should do that on
10% of your hogs, do another
10% when you get to $12.50/