Is the worst yet to come for US pork?

by Ron Sterk
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KANSAS CITY, Mo. – As the first anniversary of the identification of porcine epidemic diarrhea virus (PEDv) in the United States passed in mid-May, the disease has caused more widespread havoc than many expected. The disease is rampant in the United States where it is thought to have infected about half of all hog herds, but also has been detected in Canada, Mexico, Japan and South Korea. While it may be hoped the worst effects of the disease are in the past, no such guarantee exists in part because currently there is no vaccine for the virus.

An estimated seven million young hogs have died from PEDv in the past year, according to industry estimates, equal to 6 percent of the annual pig crop of about 116 million and more than 10 percent of the total US March 1 hog inventory of 63 million.

PEDv has been confirmed in 30 states and accelerated early in 2014, the US Department of Agriculture (USDA) said. With the lack of a vaccine, the pork industry is combating the disease through enhanced biosecurity measures, care of affected piglets and controlled exposure of not-afflicted hogs, the agency said.

It should be noted PEDv cannot be spread to humans and pork is safe to eat.

As feed prices have declined, hog producers have offset some of the head loss by marketing hogs at record-high weights, which will somewhat limit the reduction in wholesale and retail pork supplies in 2014.

The disease certainly has affected profits and production at the farm level, but its impact is far more reaching than that. PEDv has hurt profits for some meat packers, reduced pork exports, increased pork imports, reduced feed grain needs and contributed to record-high pork prices for consumers.

Donnie Smith, CEO of Tyson Foods, Inc., Springdale, Ark., said on May 5 he expects the disease will reduce US hog production by 4 percent this year. Rabobank’s Food & Agribusiness Research and Advisory group, in its latest Pork Quarterly report, said it expects PEDv to reduce US pork production 6 percent to 7 percent this year. Others, including Hillshire Brands Co., Chicago, have noted the impact of the unprecedented virus on the pork industry, including record-high prices for pork.

Uncertainty about the impact of the virus sent lean hog futures prices at the CME Group (continuous nearby contract) to record highs in March, while prices again approached contract highs in the June and July contracts during the week of May 12.

Wholesale pork prices soared to record highs in late March, with the pork cutout value reported by the USDA topping $130 a cwt, up 67 percent from a year earlier, although values have since eased.

The virus couldn’t have come at a worse time for consumers, who have been facing record or near record high beef prices for months. US cattle numbers on Jan. 1 were the lowest since the early 1950s as herds still were recovering from the 2012 drought. The hope that increasing pork supplies would offset some of the tightness in beef supplies in 2014 appears far-fetched, at least until PEDv runs its course or a vaccine is developed, both of which are unknowns at this time.

In its most recent Quarterly Hogs and Pigs report, the USDA estimated the total US hog inventory on March 1 at 62.9 million, down 3 percent from a year earlier. While the breeding inventory at 5.85 million head was up slightly from March 1, 2013, the market hog count was down 4 percent from a year ago. The December-February pig crop was 27.3 million head, down 3 percent from the same period a year earlier. The average pigs saved per litter during the period was 9.53 head, down from 10.08 a year earlier, the USDA said.

“Lower March 1 market hog inventories are largely attributable to PEDv, a coronavirus particularly lethal to pre-weaned piglets,” the USDA said.

Many had expected an expansion in hog production as producers responded to increased corn supplies and sharply lower corn prices in 2013 and 2014 after the 2012 drought and smaller 2012 crop, as well as to stronger hog prices. While expansion efforts appeared to still be under way based on an increase in breeding stock indicated in the March Quarterly Hogs and Pigs report, many of the additional pigs will go to replacing those lost to PEDv rather than increasing the total number of hogs sent to slaughter during 2014.

“Pork production is forecast to decline about 2 percent in 2014, largely the result of porcine epidemic diarrhea,” the USDA said in its April Livestock, Dairy and Poultry Outlook. “Prices of both hogs and pork will increase as a consequence.”

The greatest impact from PEDv is expected this summer, the USDA said in its May 15 Outlook. First-quarter production was up slightly from a year ago as heavier hog weights more than offset a 2.6 percent reduction in slaughter hog numbers. But second-quarter pork production is expected to drop more than 2 percent, to 5.4 billion lbs, and hog prices are forecast to average 30 percent above second-quarter 2013 levels.

“The expected reduction in second-quarter production reflects piglet losses from PEDv late last year,” the USDA said. Stronger-than-expected pork exports in March may reflect foreign buyers’ anticipation of reduced summer pork supplies from PEDv, the USDA added. Total pork exports in 2014 are expected to drop 3 percent from last year.

“Pork production is expected to increase in 2015 as the US pork industry leverages experience gained this year in treating PEDv,” the USDA said.

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