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Skilful risk management has never been so important

What kind of a maniac chooses to remain a hog producer?

Clearly, it has to be somebody who’s comfortable shouldering a ton of risk and knows how to survive disasters.

But even by the hair-raising standards of the hog industry, now seems a particular fraught and frightening time, with multiple devastating diseases, the worst trade wars in decades, oversupplied packer capacity and even activist invasions threatening the livelihoods of these tough survivors of recent decades.

What are they to do?

“I think producers should be vigilant about what’s going on in the marketplace and then adopt the appropriate risk mitigation techniques,” Andrew Dickson, general manager of the Manitoba Pork Council, told a room full of producers and workers during the Manitoba Swine Seminar.

As he noted, today’s producers tend to be well set up for risk management. These days, they have to be, especially if their banker has any say in it, which most do if the farm wants money.

But how do you hedge against so many risks, especially those like African swine fever that are so enormous that they pose an “existential threat.”

In other words, if you get hit by one like that, you might not end up continuing to exist.

Sitting here at my keyboard, I get anxious about the risks that farmers are facing. It’s just so many things at once, from ASF and porcine epidemic diarrhea virus to the tortured Canada-China situation to the United States vs China-Europe-NAFTA-Planet Earth trade wars, to way-too-many-hogs heading toward market.

Also, the world’s economy could go into a crapper if China seizes up under the pressure of coronavirus, and that would kill pork demand.

That’s a bunch of stuff.

But I imagine hog producers are actually less anxious about the situation than I am, even though I don’t have a barn and I husband not even one hog.

Why’s that? Eric Olson of MNP summed it up nicely during the seminar.

“Farmers love risk,” he noted, while laying out some of the complexities of farm safety net coverage.

In my experience covering that unique form of life known as the “farmer,” I have found this to be true, and in an often admirable way.

It’s a pretty crazy life, to yearly subject yourself and your family to the vicissitudes of the weather for often your entire income, to be subject to the swirl of disease, and to be subject to market prices over which you have zero influence. But farmers do it because they love the life and are willing to hunker down and see through the bad times, in a way an ordinary business person would not do.

So that hunkering down has brought each farmer a unique set of tools to survive bad times and those might come in handy in the next couple of years.

But it’s certainly worth a farmer’s time to get much more familiar with the safety net and risk management programs they’re running today so they actually know what they’re covered for if disaster strikes.

Olson laid out specific complications of AgriStability that could click in if ASF hits Canada, and those are worth pondering.

As is the 18-month gap that’s typical between an AgriStability claim and a payment.

And there are further complexities that could attend farms affected by a transportation shutdown, a regional quarantine or anything that could arise from an ASF outbreak.

Watch out for that big “cash flow gap” that could come from a disaster and prepare for what to do if that happens.

Right now, farmers in Western Canada are blessed by having these problems currently just theoretical. It’d be good to run through your own safety net today, before anything happens, to see how well it will hold up under the weight of your farm falling into it in any number of possible scenarios.

Farmers are cool about risk. But that coolness would fade pretty fast if some of those lines in the safety net snapped without warning.

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