WEST LAFAYETTE, Ind. — Uncertainty surrounding total swine
herd losses to porcine epidemic diarrhea virus has sent lean hog futures for
spring and summer contracts to record-high levels, but it’s possible the markets
have overreacted, a Purdue Extension agricultural economist said.
PEDV is a virus that is fatal to nearly 100 percent of
infected piglets that are less than 2 weeks old. There is no vaccination or
treatment for the disease, which poses no threat to human health or food
While PEDV can be devastating to individual swine herds,
Chris Hurt said it remains to be seen whether slaughter supplies will fall
enough to warrant the $10 to $14 per-hundredweight surge in spring and summer
futures prices 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 wrote in a weekly outlook report.
“When adjusted for the number of slaughter days compared to
last year, the slaughter count so far is down 0.5 percent. However, market
weights have been higher by about 2.5 percent, thus causing total pork
production to be up by about 2 percent.”
According to Hurt, the futures market suggests that lean hog
prices could average about $112 per hundredweight for the period of March
through August. This compares with an average of $88 per hundredweight for the
same period last year.
If fear of low slaughter supply is the cause of the price
jump, Hurt said it means traders expect hog slaughter supplies could be down by
as much as 7 percent to 10 percent.
When compared with USDA’s December inventory count, those
numbers indicate that slaughter supplies for the second quarter of 2014 will be
down only 0.5 percent. Third-quarter supplies will come primarily from winter
farrowings, which is where the most uncertainty comes into play.
“Winter farrowing intentions were up 1.3 percent, but since
PEDV kills baby pigs and is most prevalent in cold months, the number of pigs
weaned per litter could be down sharply,” Hurt said. “This is where no one knows
The USDA will provide an updated inventory report on March
28, which will provide information on the number of pigs that survived the
If lean hog slaughter supplies end up dropping by only 3
percent or 4 percent instead of the larger losses, markets might be expecting
futures prices could come down.
The bigger question, Hurt said, is how PEDV will affect the
financial well-being of the pork industry as a whole this year.
“The initial answer might be somewhat surprising,” he said.
“PEDV will likely increase economic returns for the U.S. industry.”
Demand for pork tends to hold fairly steady, and consumers
are slow to reduce their pork use even in short-supply situations. According to
Hurt, hog prices tend to increase by at least 2 percent for every 1 percent that
the quantity drops.
“This means that total revenue in the industry will likely
increase due to PEDV and more than offset the losses from the disease,” he
The outcome for individual hog producers won’t necessarily
mirror that of the overall industry. Producers with herds severely affected by
PEDV with more piglet deaths than the national average, could end up with net
financial losses, Hurt said. High hog prices could offset pig losses for
producers with an average number of piglet deaths.
“PEDV could actually be a financial windfall for producers
who are able to avoid the disease,” the economist 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.”