Positive USDA Hog Report Ignores the Realities of PEDV

ANALYSIS – During a teleconference hosted by the National Pork Board, analysts cast some doubts about the very positive USDA Quarterly Hogs and Pigs Report. The as yet unknown effect of PEDV this winter is worrisome to the industry, writes Chris Wright, Senior Editor, for ThePigSite.
calendar icon 29 September 2014
clock icon 6 minute read

On 26 September, the USDA released the Quarterly Hogs and Pigs Report, for the third quarter (June through August 2014), which had some positive numbers, and is seen as a bullish report by analysts. The US hog inventory on September 1, 2014 was down two per cent from a year ago, but up six per cent from June 1, 2014. The breeding inventory was up two per cent from last year, and up one per cent from the previous quarter. The market hog inventory was down three per cent from last year, but up seven per cent from last quarter.

More importantly, the USDA report stated that hog producers intend to increase farrowing in the September-November 2014 quarter by four per cent, compared to the same period in 2013. Intended farrowings for December-February 2015, are up four per cent from 2014, and up three per cent from 2013.

To read the full USDA Quarterly Hogs and Pigs Report, click here.

Following the release of the USDA report, the National Pork Board hosted a press teleconference, featuring three analysts to discuss the details of the report in more depth.

Ignoring the Effects of PEDV?

Dr Ron Plain, Professor of Agricultural Economics, University of Missouri, pointed out the very optimistic farrowing intentions for the fall and winter in the USDA report. Those numbers, four per cent growth in the fall and three per cent growth in the winter, seem to ignore the realities of PEDV (Porcine Epidemic Diarrhea Virus) and the expectation that it will negatively affect the US pork industry again when the weather turns colder, he said.

Dr Plain mentioned that the two new PEDV vaccines now available on the market seem to be working, but have yet to face the challenges of cold weather. He predicted that PEDV will become a winter seasonal problem for the industry and that there will be recurring problems with pig loss.

However, Dr Plain said that he does not believe the PEDV losses will be as bad this coming winter as they were last winter, so the industry will fare better than a year ago, but still will not reach pre PED levels.

Regarding pork prices, Dr Plain noted that these will have to go down as supplies increase. He predicted pork prices will stay high for the fourth quarter of the year and then steadily drop throughout 2015.

Two Years to Recover

Daniel Bluntzer, Director of Research for Frontier Risk Management in Texas, echoed Dr Plain’s doubts about the USDA Quarterly Report, saying that the industry should not put too much stock in those numbers. He does not expect the industry to get back on track quickly.

He pointed out the report’s numbers of 10.16 pigs per litter in the June–August quarter and that it will take producers eight or nine quarters (two years) to get back to pre-PED levels.

Mr Bluntzer noted that the hog slaughtering projections are going up, significantly, more than the industry has seen in over a decade. He questioned whether this will come to pass or if those numbers are too large.

He observed that USDA reports make their data comparisons based on the same quarter of the previous year. Since the PEDV situation has improved for the US pork industry, those USDA reports will continue to be very positive. However, those reports will not indicate the reality of where the industry is now in comparison to pre-PEDV levels, which is really where the industry wants to be.

In terms of pork prices, Mr Bluntzer disagreed with Dr Plain as to what will happen in 2015, as he sees some big ups and downs in prices next year.

Canadian Perspective

Kevin Grier, independent livestock and meat market analyst from Ontario, Canada, mentioned that PEDV in Canada has not really had an impact on the market. The first PEDV case occurred in January of 2014 and there were fears in the industry, which thankfully never materialized. The Canadian pork sector has seen a modest expansion, with good profitability, even better than in the US.

Mr Grier said that the four per cent increase in farrowing intentions mentioned in the USDA report caught his eye. Like the other two analysts he questioned what the effects of PEDV would be, and how that would affect the optimistic growth projections.

He noted that due to PEDV, there has been an incredible increase in biosecurity on Canadian farms which has improved all-around animal health issues for the pig industry.

Turning to exports, Canada has been hit hard by the Russian ban, particularly for ham and trim products. However, there have been some offsetting factors, Mr Grier said. First of all, a major Canadian pig packer has recently gone bankrupt. Therefore, the industry decided to keep more weaners and feeders in Canada, and not send them to the US, where Midwestern packers have come to depend on that source of meat.

Also, Canada is now exporting pork as a backfill to those countries which have increased their exports to Russia.

Looking at US pork industry expectations, Mr Grier said he has a great deal of confidence in the US pig crop, particularly this fall, but much less confidence in the winter due to PEDV.

As to US pork prices in the next year his predictions are much higher than the other analysts on the panel, particularly for the fourth quarter of 2014 and the second quarter of 2015. For the first quarter of 2015, he still sees high prices, but lower than for the fourth quarter of 2014 and the second quarter of 2015.

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