Source: MEATINGPLACE, 1/21/14


The impact of the porcine endemic diarrhea virus outbreak has taken longer than expected to subside and remains the key risk to pork packer margins if supplies fall below expectations, writes BMO Capital Markets analyst Kenneth Zaslow.

PEDv continues to spread and is likely to reach the Northeast over time, with cold spring weather contributing to the spread, he said.

PEDv fears limited sow movement in December, keeping sow prices at levels 30 to 35 percent above last year’s. However, weaker demand during the holidays and lower slaughter levels contributed to a 3 percent decline in sow prices in December, Zaslow said.

Sow prices will moderate further as PEDv fears eventually wane and sow movement improves and could be 15 percent below last year by summer, Zaslow said.

Pork packer margins remained near three-year highs in December as margins increased to $12-$13 per head from a loss of $1 per head last year. Strength reflected more ample hog supplies and improving export values, he said.

Margins pulled back recently, reflecting a bullish Hogs and Pigs report, seasonally weaker demand after Christmas and record hog weights, but the slide is temporary, Zaslow predicted. Pork margins should remain above year-ago levels, he said, because the Hogs and Pigs report may have understated hog supplies.

Pork prices also should remain more resilient than hogs due to demand for Easter features and support from high beef prices, the analyst said.

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