Rabobank: PEDv to dramatically affect pork production
by Keith Nunes
NEW YORK – Rabobank is forecasting that porcine epidemic diarrhea virus (PEDv) will have “significant impacts” on pork production and slaughter through 2015.
“In the United States, 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 percent of annual slaughter,” said William Sawyer, an analyst for Rabobank. “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 percent to 25 percent against 2013 levels. If the virus continues at its current rate, the shortfall to US slaughter in 2014 could be as much as 15 million hogs.”
With regard to productivity, 2014 will be a story of the haves and have-nots, where hog producers who experienced mild cases of PEDv, or none at all, may realize margins of more than $60 per head, the highest calendar year average seen in Rabobank's 40-year record. Conversely, hog producers who have had difficulty eradicating the virus may suffer significant losses as the pain of the high fixed costs of modern hog production compounds prolonged periods of weak productivity.
Rabobank declared the real winner in the PEDv situation will be the US poultry industry. Beef production in the US is forecast to decline by nearly 6 percent in 2014 and, coupled with Rabobank’s estimate of 6 percent to 7 percent less pork production, the situation implies an exceptional opportunity for the US chicken industry. Chicken production in the US would have to rise by 8 percent to 9 percent to offset the shortfall from beef and pork, but a limited breeder flock and continued high demand for fertilized eggs from Mexico will keep supply growth restrained. As a result, Rabobank expects chicken prices and margins to climb this spring and summer, yielding a favorable year for the US chicken industry.