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Looking at all aspects of risk management

Livestock producers face higher feed costs in 2021 and an ag economist says producers need to implement some serious risk management tools.

University of Missouri’s Scott Brown says USDA has adjusted their corn ending stocks number.  “Corn ending stocks are around 1.5 billion bushels and soybeans are less than 200 billion bushels,” he says.  “We haven’t been at those level of stock in quite a while and markets react quickly to positive trade news or negative supply news.”

And, he tells Brownfield, there’s potential for even tighter margins.  “Do we end up in a situation where we start talking about dry weather,” he says.  “If we do, perhaps we’re going to talk about feed costs that shoot up more quickly because we don’t have the same stock holding that we would have had just a few years ago.”

Brown says risk management is more than just locking in lower feed costs.  “If we get a really positive demand boost on the livestock side of the equation that drives cattle and/or hog prices higher, we may want to take advantage of that,” he says.  “It doesn’t say that those prices can’t go higher.  If we have some type of profitable return, maybe we want to cash in and let someone carry some of that risk for a while.”

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