There are some good reasons why 2014 looks like the best year for pork since 1990. "Our cost models are showing $27 to $28 profits per head this year, so it looks like the best year in a long time," says Steve Meyer, president of Paragon Economics. If there’s a good crop this year, corn prices could drop even more. On the soybean side, worldwide demand remains strong, driven by China. It will take a lot more soybean acres in 2014 to bring soybean meal costs down substantially. Still, feed costs are much lower than they were a year ago. Today, it costs about $30 a head less to raise a pig, Meyer says.
What about Porcine Epidemic Diarrhea Virus (PEDV)? There are some questions about how PEDV will impact supplies in 2014. It hasn’t had a major impact yet, Meyer says, because the first of the big PEDV losses happened in summer 2013, and those pigs came to market in December.
"I think the impact will be pretty large this summer, given the number of sow farms that were involved in PEDV breaks," he says. "The futures market is incorporating these factors with contract live highs on summer contracts."
While no producer wants to lose pigs, the financial impact of PEDV might be mitigated, Meyer adds. As the disease spreads, the financial impact on any one person gets smaller.
- April 2014