The product of a good marketing plan is to receive the best possible price for finished hogs. Briefly stated, a good marketing plan is one that compares all pricing alternatives, then sells based on this comparison. For many producers, hedging hogs on the futures market has been considered too complicated.
Few producers have an understanding of hedging or how it can help profitability.
Hedging is simply a tool to lock in an acceptable future price for hogs, one that will insure profits or minimize losses, depending on the market. A futures contract covers 30,000 pounds, or about 130 230-pound pigs. Half and quarter contracts are also available. The amount depends on the number of contracts and the broker. Options are a newer method of forward pricing.