Purdue Extension Economist Chris Hurt acknowledges porcine epidemic diarrhea virus (PEDV) is devastating to individual swine herds, but says it will likely increase economic returns for the U.S. industry. He says demand for pork tends to hold fairly steady and consumers are slow to reduce their pork use even in short supply situations, which means that total revenue in the industry will likely increase due to PEDV and more than offset the losses from the disease.
"PEDV could actually be a financial windfall for producers who are able to avoid the disease," he said. "At the farm level, current futures markets are suggesting a live price for 2014 at a record high of $76 per hundredweight compared with $64 last year. This will provide record-high industry revenues and the highest profit per head since 2005."
Hurt says it remains to be seen whether slaughter supplies will fall enough to warrant the $10 to $14 per cwt. surge in spring and summer futures over the past two weeks. "So far this year the number of animals coming to market has been very close to the numbers indicated in the U.S. Department of Agriculture's December Hogs and Pigs report," he says. "When adjusted for the number of slaughter days compared to last year, the slaughter count so far is down 0.5%. However, market weights have been higher by about 2.5%, thus causing total pork production to be up by about 2%."
Hurt believe that current futures prices suggest that traders expect hog slaughter supplies to be down by as much as 7% to 10%. "Winter farrowing intentions were up 1.3%, but since PEDV kills baby pigs and is most prevalent in cold months, the number of pigs weaned per litter could be down sharply," he said. "This is where no one knows for sure."
USDA will release its next Hogs & Pigs Report on March 28. Hurt says if hog slaughter ends up up dropping by only 3% to 4% instead of the larger losses factored into prices, futures prices could come down.