CME: Pork Producers Start to Reduce Sow Herd

6 August 2012, at 1:03pm

US - We can only hope that markets — and news reporters — look at the facts of the new swine flu strain that grabbed some headlines over the weekend, write Steve Meyer and Len Steiner.

The Centers for Disease Control announced on Friday that they have now identified 29 cases of H3N2v influenza in humans since July 2011. That total includes 12 new cases, 10 of which were found in Ohio. All of the 12 new cases were reported in people who had been in direct contact with pigs with the Ohio cases being associated with a fair.

The CDC reports that this strain has a gene from the H1N1 virus that caused all the undeserved problems for pork back in 2009. But so far there is no evidence that the H3N2v virus is spread from human to human. Normal flu symptoms of fever, cough, runny nose, sore throat, muscle aches are reported. There have been three hospitalizations and all three of those people had high-risk characteristics. All reported victims have recovered fully.

One point in the CDC information is critical: Influenza viruses have not been shown to be transmissible to people through eating properly handled and prepared pork. Visitors to fairs or those working around pigs were warned to take normal flue prevention steps: watch animals for signs of illness, wash hands frequently, don’t eat or drink in animal areas.

Facing unprecedented costs of production and sizable losses over the next 15 months, U.S. pork producers have apparently begun the expected reduction of the U.S. sow herd. Actual sow slaughter data is known only with a two-week time lag but the mandatory price reporting (MPR) system reports the numbers of sows purchased each day by packers that process 100,000 head or more sows or boars per year. Weekly totals for sow purchases are shown in the top chart at right. Note that the observation for the most recent week is based on the percentage change for Monday-Thursday last week versus the same four days the prior week since the purchase data for Friday August 3 has not yet been published. The past four weeks have seen double-digit year-on-year growth in the number of sows purchased with last week’s estimated total exceeding year-ago levels by nearly 28%.

There is one complication to inferring sow slaughter from these purchase data, however. Note that the purchase data have exceeded year-ago levels consistently virtually all year and have done so quite markedly since March 1. The bottom chart shows this is NOT the case with actual sow slaughter, however. It appears that a new company was added to the MPR-covered packer list last spring. The average difference between the reported number of sows purchased and the number of sows slaughtered shrank from nearly 18,000 to just 13,600. This change means that actual sow slaughter has not grown as much as has MPR-reported sow purchases—but the growth has been noticeable over the past four weeks and last week’s estimated slaughter of 62,750 would be 13.7% higher than one year ago.

Sow prices began falling in early July as offerings began to grow. The weekly average price for sows weighing 500-lbs and over fell from the mid-$50s of May and June to just $42.67 last week. So why have sow slaughter firms not pushed numbers even higher? The answer is demand and the real problem is timing. This surge in sow offerings comes too late to produce traditional summer sausages such as bratwurst and too early for the normal seasonal surge in breakfast sausage usage that comes with the new school year. So, even though sows are relatively cheap and processing them is profitable, it is difficult to move fresh product and sow processors appear reluctant to put product in freezers.

Some questions had also been raised about slaughter capacity but we think that is a non-issue. According to data published by National Hog Farmer magazine, the capacity of sow slaughter plants is estimated to be 21,455 head per day. That’s 107,275 for a 5-day week or 85,820 for the more typical 4-day week of sow plants — both numbers are still FAR larger than recent slaughter levels.

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