Market Preview: Circovirus uncertainties; slow expansion continues

US - Weekly U.S. Market Preview w/e 29th September, provided by Steve R. Meyer, Ph.D., Paragon Economics, Inc.
calendar icon 30 September 2006
clock icon 5 minute read

Circovirus raises uncertainties, as slow expansion continues

There is still a lot of talk about porcine circovirus type 2 (PCV2) and porcine circovirus-associated disease (PCVAD), but much of the discussion is now shifting to vaccines that have been used in Canada and tested in the United States.

Virtually all of what I have heard about the effectiveness of the vaccines has been positive. There is, however, a problem with availability, especially in the United States. Whether the holdup is regulatory or manufacturing is not completely clear, but it doesn't look like much of the vaccine will be available for several months.

The use of this vaccine is great for pigs and good for producers, but we need to monitor it for potential market effects. The question is whether effective vaccines will have the diluted, gradual effect on market numbers that we have always seen from disease-driven death losses.

I'm still not convinced that the short slaughter hog supplies of May and June were caused by PCV2/PCVAD, since we had larger-than-expected slaughter runs in July. Could it be that the real effect of the disease last spring was to slow down growth rate? I know that many pigs died, but it certainly appears that losses were smaller than the horror stories had us thinking.

The use of a vaccine could be rather sudden depending on how much becomes available. More, effective vaccine could certainly result in higher survival rates and higher market supplies, perhaps as quickly as a month or two after use. I'll watch the situation and provide any insights I can gain.

Hogs & Pigs Report

USDA's Quarterly Hogs and Pigs Report will be released on Friday afternoon and, judging by DowJones compilation of market analysts' pre-report estimates (shown in Figure 1 below), it will be another yawner. Not that a yawner would be bad, mind you. The slow pace of expansion is largely the reason for continued good hog prices, and a continuation of that pace may be sorely needed when the 2007 corn crop starts flowing to the plethora of ethanol plants that will be up and running next year.

The only two numbers in DowJones collection that exceed 101% of year-ago levels are for hogs weighing over 180 lb. and the breeding herd. The 180+ number at 101.8% appears low, based on September slaughter.

USDA's estimate for daily slaughter set another record (417,000 head) on Wednesday. The decline in live hog prices this past week puts packer margins in a good position to drive a sizable Saturday kill this week. Even with a 100,000-head run this Saturday, September 2006 slaughter will be only slightly larger than one year ago -- but there's a catch.

September this year includes 20 weekdays and five Saturdays. September 2005 included 21 weekdays and four Saturdays. Adjusting for that difference would give an apples-to-apples comparison that shows 2006 September slaughter was up 3% or more from last year. And it is not Canadian imports that make the difference. Shipments of Canadian slaughter hogs from Aug. 27 through Sept. 23 were over 30,000 head (14%) smaller than last year.

The breeding herd estimate at 101.1% of last year looks quite reasonable, but still belies this summer's large sow slaughter and relatively low gilt retention figures from the University of Missouri's weekly packer surveys. As can be seen in Figure 2, U.S. sow slaughter had gotten closer to year-ago levels for the five weeks prior to Labor Day, but has now jumped back to over 4,000 head (6-8%) larger than last year.

It appears to me that we are seeing a fundamental change in the relationship of sow slaughter to the sow herd. I'm not sure yet what has changed, but I do believe that we are simply seeing more sows make it to slaughter. There simply is no other good answer at this point.

Breeding Herd Structure Summary Report

USDA released the 2006 version of its U.S. Hog Breeding Herd Structure report last Friday. It includes updated information on various productivity measures for the U.S. industry.

Some highlights are:

  • Continued growth in the productivity of the U.S. herd, with pigs saved/breeding animal in 2005 growing to 17.4, up from 16.9 in 2003.
  • An increase in the number of operations with 5,000 head or more in inventory, moving from 2,270 operations in 2003 to 2,360. These operations now account for 82% of the U.S. pig crop.
  • Large operations average 9.09 pigs/litter, up from 8.99 in 2003. Smaller operations (those with less than 5,000 head) average 8.66 pigs/litter, up from 8.48 pigs/litter in 2003.
These data always stir discussion regarding the relative efficiency of different sizes of operations. Everyone should remember that these are averages for the groups and that there is quite a bit of variation in both. There are smaller operations that are just as efficient as the big guys, and there are big guys who struggle with production efficiencies.

It is clear that, on average, the big operations do better. But note in these data that the smaller operations have made more progress in litter size (0.18 pigs/litter vs. 0.10 pigs/litter) over the past two years. Part of that is the reduction in the number of very small herds that tend, on average, to produce substantially smaller litters.

© 2000 - 2023 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.