Hog Margin Indicator (HMI)

The Hog Margin Indicator is a marketing information service designed to improve your hog profits.
This service provides you with an indication of what margins are possible if you lock in your hog prices and your feed costs.
Manitoba Pork Marketing wants to assist you in making better pricing decisions by providing you with essential market information and related pricing strategies in a timely manner.

Your hog profits are affected by changes in the sale price of hogs, the purchase price of weanlings and feed inputs.
The Hog Margin Indicator is based on the value of a market hog minus the weanling cost and the cost of feed used to produce the hog.
This margin remains to cover all other costs, and provide you with a reasonable profit.
Any change in it will indicate a change in your profits.

You would financially benefit if you could capture the high profit margins and minimize or completely eliminate the lower margins.
Manitoba Pork Marketing's services for forward contracting provide part of the answer.
We have developed new risk management services that allow you to lock in the Canadian/US exchange rate and your corn and soymeal feed requirements in order to protect your hog margins.
The adjacent graph illustrates the Hog Margin Indicator as reported for the August 1999 delivery period.
As you can see, during the month of May 1999, margins of $58/hog could have been achieved before falling to levels of $10/hog.

Hog Margin Indicator (HMI):

The Hog Margin Indicator will be provided for each month, 11 months into the future (according to representative industry calculations), along with the forward prices for hogs.
For example, on August 2nd, 2000, Manitoba Pork Marketing's opening forward contract prices and related HMI were as follows:

	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun	Jul
Hogs $/cwt	67.51	63.19	56.50	56.50	57.20	58.02	55.04	56.93	61.85	65.95	59.90
HMI $/hog	21.36	14.73	-6.94	3.19	15.31	22.06	22.88	22.07	28.96	38.88	35.41

HMI Calculation:

The calculation for the HMI is kept as simple as possible.
It won't reflect your exact margin, however, it will provide an industry measure to show pricing trends and opportunities affecting your profit margins. You can make your own adjustments to customize the calculation to your own operation.
The factors within the calculation are as follows:

Hog Value:

• Manitoba Pork Marketing's forward contract price, on a 245 pound liveweight hog, dressing 80 percent with a 109 index, and a weight/loin premium of $3.00.

Costs for feed and weanling are deducted:

• 3:2 conversion for 50 to 245 pound gain: 75% barley, 20% soymeal, and 5% premix.
• Feed is valued at current prices for the first 3 months, and forward contract prices into the future.
• Hog forward contract prices, 3 months earlier, for months 4 to 11 months ahead.
• Futures market values are used for barley and soymeal where necessary, with the appropriate adjustments for basis in Manitoba.
• Current premix costs are applied to the remaining 5% of the ration.
• 1.7 of the current market price x 50 lbs for the first 3 months.
• 1.7 of the forward price x 50 lbs for months 4-11 ahead.

Market Information:

It is very important to watch market information closely to enhance the success of your strategies.
In addition, the market outlook can at times indicate a recommended strategy.
For example, In April 1999 it was recommended to lock in the margin on a portion of your hogs for August & September.
The market information in April suggested to price hogs then, and to wait to lock in feed costs in September, since typically feed is near its seasonal low price at that time.
This strategy would have likely resulted in a margin of $50 per hog compared to an actual margin in August & September of $10 to $20 per hog.

To find your own hog margin index click here Hog Margin Calculator
In order to use this program, a user name and password is needed, if you do not have one contact Tyler @ 1-204-793-2294.