Vexing virus

by Steve Kay
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The pork industry and USDA have scrambled to contain the spread of PEDv and identify how it is transmitted. But progress has been limited.

The livestock industry’s worst nightmare is an animal disease that suddenly emerges and keeps on spreading. Just think bovine spongiform encephalopathy (BSE) and how it threatened to decimate Europe’s cattle industry after it appeared in the mid-1980s. Just think foot-and-mouth disease, which caused huge destruction to the British livestock industry before that.

The US beef industry has rebounded from its four BSE cases, and perhaps fortuitously, the US has not had an FMD case since 1929. But the pork industry, the third-largest in the world, has a disease crisis on its hands that it’s struggling to contain, let alone solve. The spread of the disease has killed 8 million young pigs since June last year, cut pork production by about 1.40 billion lbs. and forced the wholesale and retail price of pork to rise to record highs.

The disease is Porcine Epidemic Diarrhea virus (PEDv). A type of coronavirus, PEDv is fatal to young pigs and is only infectious to swine. Humans are not susceptible to the virus in any way. It was first detected in Britain in 1971, spread to Europe and then to Asia. The particular variation of PEDv that has infected the US herd is believed to have originated in China; there are now four different versions in the US.

PEDv was first confirmed in the US on May 16, 2013, in a herd in Ohio. It has since spread to 30 states and into Canada and Mexico. That slaughter-hog prices consequently set new record highs is little consolation to individual producers. Some have seen their pig herds decline as much as 50 percent. Just over half the US breeding herd has been affected, analysts say.

The pigs that have died had a combined value of $280 million just to produce, says industry economist Steve Meyer, president of Paragon Economics. At finishing, they might have been worth a combined $1.26 billion, he says.

“The pigs would have cost about $40 each to produce - that is at the time that they died,” says Meyer. “Had they not died, they would have been worth anywhere from $160 to about $200 each at finishing. None would have been worth the $250 or so that the remaining pigs will bring this summer. Profits on those pigs would have run from zero last fall to about $50 per head this summer,” he says.

Production cuts

The cumulative impact of the deaths means that fewer market hogs have been available to pork processors from early in the year. Several plants by early April, notably Smithfield Foods’ huge Tar Heel, NC, plant, were running reduced hours. As of the week ended April 26, year-to-date commercial hog slaughter was down 4.3 percent on the same period a year ago. Pork production during the period was down only slightly because of record-heavy hog carcass weights. Yet, the full impact of PEDv deaths is still to show up, say analysts. The decline in the number of market-ready hogs likely will not peak until July or August.

Slaughter reductions this summer could be greater than 10 percent, relative to last year’s levels, Dr. Howard Hill, president of the National Pork Producers Council, told a congressional hearing on April 30. Higher market weights because of lower feed costs and the industry’s efforts to offset some degree of PEDv pig losses would offset 3 to 4 percent of that reduction. But pork production will likely be down 6 to 8 percent in the third quarter. Such a reduction would push hog prices up by 15 percent to 25 percent and force consumer-level pork prices upward by 10 percent to 12 percent, he said.

PEDv’s impact will further affect Tyson Foods’ hog supplies, beginning around June 1, peaking in August and then beginning to ease in October, Tyson’s president and CEO Donnie Smith told analysts in early May. Hog weights are expected to be higher and offset some of the head reduction. Tyson anticipates industry pork production to be down as much as 4 percent for the year. Tyson will need to adjust its operating hours accordingly, he says.

There is no question the industry will have fewer pigs this year, Smithfield’s CFO Kevin Sullivan told analysts May 14. But higher weights will help offset as much as half the head loss. Smithfield has seen estimates ranging from 3 to 8 percent less pork supply and it thinks these are right, he says.

Consumers began feeling the PEDv pinch in March. The weekly fresh pork wholesale cutout, as reported by USDA, began the year at $83.70 per cwt, up only 1.4 percent from the year before. It broached $100 the last week of February and hit a record high of $131.97 the week ended April 5. It had declined to $117.35 the week ended April 26, but the damage was done. Retail pork prices, as also reported by USDA, averaged $3.76 per pound in January and $3.95 in April, up 5.2 percent. They were expected to be higher again in the June report.

The pork industry and USDA have scrambled to contain the spread of the virus and identify how it is transmitted. But progress to date has been limited. USDA on April 18 said it would require reporting of the virus and coronavirus to slow the spread of the disease. Economist Meyer said this was a positive step. But he wished USDA had taken it last summer when it became obvious the virus was spreading rapidly, he told Reuters.

Pork producers offset higher mortality rates due to PEDv by finishing live hogs to record weights.

Ready or not

USDA, the pork industry and its state and federal partners also together established testing protocols, sequenced the virus and are investigating how the virus is transmitted. The actions will help identify gaps in bio-security and help stop the spread of these diseases and the damage caused to producers, industry and consumers, said Agriculture Secretary Tom Vilsack.

Earlier in April, more than 60 people representing the US and Canadian pork, feed and other allied industries participated in a meeting on the virus. The group agreed there are multiple ways for pigs to become infected via a fecal-oral route, including environmental, transportation, feed systems and other vectors.

The top research priorities agreed upon by the group were: to investigate the effectiveness and cost of treatments that could be used to mitigate the survival of PEDv and other viruses in feeds; to conduct contamination risk assessments at all steps within the feed processing and delivery chain; to develop a substitute for the currently used swine bioassay procedures; to continue to investigate the risk of feed and other pathways for pathogen entry into the US.

The Pork Checkoff by early April had funded 17 PEDv-related research projects totaling nearly $1.7 million. The Institute for Feed Research and Education, the American Feed Industry Association’s foundation, pledged $100,000 toward PEDv research.

However, research to date has not determined how the virus entered the US, how to contain it and how to protect young pigs against it. Researchers are exploring whether the widespread use of pig-blood byproducts in hog feed might have introduced the disease, said a Reuters news story.

So far, no vaccine has been able to completely protect pigs from the disease, Reuters said. An Iowa company, Harrisvaccines, has made some progress, while pharmaceutical giants Merck Animal Health and Zoetis have joined with universities to begin vaccine development. There is no silver bullet for PEDv, said Justin Ellis, marketing manager at Alltech, which developed a feed additive designed to reduce risk of the disease.

Tyson’s Smith says he is not aware of any vaccine that has been developed. “I do know in working with our pork suppliers...there has been a noticeable increase in bio-security throughout the areas where we draw our hogs from.”

As if the quest for an effective vaccine isn’t vexing enough, as baffling is the way live hog and wholesale pork prices over-reacted to the news of the virus. Barrow and gilt (live hog) prices in the quarter, led by record-high futures prices, averaged $68.69 per cwt live, up 16.4 percent from the year earlier quarter. Second-quarter prices are forecast to go up about 22 percent from last year.

Reduced slaughter due to the virus only began to show up in March, which reflected the fact that the virus might have had its biggest impact over the winter months. But producers offset the higher mortality rates due to the virus with finishing live hogs to record weights. First-quarter pork production totaled 5.785 billion lbs., up fractionally from the first quarter of 2013, even though total hog slaughter was down nearly 4 percent.

Reinforcing the over-reaction was the fact that USDA’s March 28 Quarterly Hogs and Pigs report showed the US hog herd didn’t shrink as much as analysts had forecast. The inventory of all hogs and pigs on March 1 was 62.9 million head, down 3 percent from the year ago period and down 5 percent from Dec. 1. Analysts expected the herd to be only 61.5 million head.

The data suggested that the hog herd was not as hard-hit by PEDv during the December-February period as originally feared. During the period, the pig crop declined 3 percent from 2013. Analysis of the report numbers suggested baby pig death loss over the previous six months was about 5 percent.

Also revealing was hog producers increased their breeding herds and farrowings to offset death loss due to the virus. Sow farrowings during the December-February period increased 3 percent, although the average pigs saved per litter was 9.53 for the period vs. 10.08 a year earlier. The report also showed the breeding inventory at 5.85 million head was up slightly from a year ago.

The number of market-ready hogs on March 1 totaled 57.0 million head, down 4 percent from last year. But even this suggests far smaller declines in live-hog marketings this year than was estimated in a Rabobank report in March. It forecast an 11 percent loss for pigs coming to market in 2014, with peak losses exceeding 20 percent for late summer marketings.

Looking forward, live-hog marketings will show their largest year-on-year declines over the summer, but hog and wholesale pork prices won’t return to record-high levels. Meanwhile, efforts to prevent PEDv infections continues, amid concerns that the virus might spread again this winter.

Steve Kay is editor and publisher of Petaluma, Calif.-based Cattle Buyers Weekly (www.cattlebuyersweekly.com).

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