Source: Rita Jane Gabbett, MEATINGPLACE, 3/18/14


Escalating hog prices first driven by processors stockpiling out of fears of future reduced supplies are now going higher as smaller litters due to porcine epidemic diarrhea virus (PEDv) death losses in August and early September are hitting the market, reducing supplies further, according to a Wall Street analyst.

BB&T Capital Markets analyst Heather Jones predicted Smithfield Foods would reduce slaughter again this week. Reuters reported Smithfield did not slaughter hogs at its Tar Heel, N.C., facility last Friday to cope with limited hog availability. The company declined to comment.

Other large processors, including Cargill and Tyson Foods, also declined to comment to Meatingplace on whether or not they were reducing hog kills.

USDA’s National Animal Health Laboratory Network reported 274 new cases of PEDv last week and noted Arizona reported its first confirmed case, bringing to 27 the number of states having reported at least one confirmed case of PEDv.

Reuters reported that industry analysts estimate PEDv has killed between 4 million and 5 million hogs since May 2013.

The pork cutout, which began to move in mid-February, has jumped in recent days to nearly 50 percent higher than a year ago, Jones observed in a note to investors, as slaughter rates are down about 5 percent to 6 percent from a year ago.

“Given that the rate of new infections accelerated from September last year, one would expect weekly kills to get progressively shorter. Head slaughtered could fall 10 percent or more June to July, outpaced somewhat by higher weights and higher productivity in uninfected herds,” Jones wrote.

Packer margins have exploded as the surge in the cutout has strongly outpaced cash hogs. Jones predicted as hogs become increasingly tight, “We expect that gap to narrow and likely very significantly during the summer.”

Given these predicted supply shortfalls, Jones suggested some producers might not wait until the PEDv issue is resolved to begin expansion.

Pork demand
USDA on Monday reported that demand was also a factor pushing hog prices higher in February.
“Estimated pork production, and hog and retail meat price data for February, suggest that consumers are substituting pork products in place of high-priced beef,” USDA analysts wrote in the monthly Livestock, Dairy, Poultry Outlook report. “With wholesale Choice and Select grade beef boxes priced at $200-plus since early January, and retail beef prices at $5.35 per pound in January, consumers may be moving to pork as a less expensive alternative.”

USDA predicted hog prices are expected to average $68-$72 per hundredweight in the second quarter of this year and between $65 and $69 for 2014.

Higher domestic pork prices are expected to limit pork exports in the second half of 2014. U.S. pork exports are expected to be 5.1 billion pounds, an increase of about  1.5 percent over 2013.

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