“In the U.S., we see the outbreak of PEDv causing a significant shortfall in the availability of market hogs in 2014 – to the tune of 12.5 million hogs or 11% of annual slaughter,” says William Sawyer, a Rabobank analyst.
With the help beef prices are receiving from less pork production than expected, plenty of cattle producers are looking for more clarity about the impact that Porcine Epidemic Diarrhea virus (PEDv) may have on pork production this year. If anything, reports this week raised more questions.
“In the U.S., we see the outbreak of PEDv causing a significant shortfall in the availability of market hogs in 2014 – to the tune of 12.5 million hogs or 11% of annual slaughter,” says William Sawyer, a Rabobank analyst. “Given the ever-rising number of PEDv cases reported, coupled with a six-month average lifecycle, the months of August through October are likely to be the tightest for processors, where slaughter could decline by 15% to 25% against 2013 levels. If the virus continues at its current rate, the shortfall to U.S. slaughter in 2014 could be as much as 15 million hogs."
Rabobank published a report this week examining the impact of the PEDv on the North American swine herd.
Analysts with Rabobank’s Food & Agribusiness Research and Advisory team say in the report that PEDv has impacted about 60% of the U.S. breeding herd so far, along with 28% of the Mexican herd, and is beginning to develop in Canada.
If PEDv spreads in Canada and Mexico at the pace seen in the U.S., Rabobank analysts say that North American hog slaughter could decline by nearly 18.5 million hogs over 2014 and 2015, or 12.5% relative to 2013 levels. Overall U.S. pork production is anticipated to decline 6% to 7% in 2014, the most in more than 30 years.
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These factors are why many were surprised to see USDA estimates in Friday’s quarterly Hogs and Pigs report higher than pre-report expectations.
USDA’s estimate of the December-February pig crop (27.318 million) is 2.8% less than a year earlier. Trade estimates ahead of the report expected a decline of 3.6%, although the range of expectations was wide.
“Normally a smaller than expected drop in the pig crop would be perceived as bearish to prices,” John Otte, Penton analyst, explained Friday following the report. “However, the unusually wide range of pre-report guesses (from down 9.2% to up 1.4%) indicates considerable disagreement among analysts as to the actual magnitude of death losses due to PEDv.”
If you follow Lean Hog futures, then you know nearby contracts have provided a limit-up and limit-down thrill ride as speculators try to ferret out the death loss to baby pigs in December to February, in order to gauge how many hogs will come to market May to July.
Especially considering the recent data, Otte says, “Questions about actual losses will persist until hogs born in the winter begin to come to the slaughter market.”
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