PEDv decimating hog herd, creating opportunity for poultry, Rabobank says

By Daniel Enoch

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, March 26, 2014 - The Porcine Epidemic Diarrhea virus (PEDv) may reduce the availability of hogs for slaughter in the U.S. by about 11 percent this year, creating a major marketing opportunity for the poultry industry, according to a report by Rabobank's Food and Agribusiness Research and Advisory team.

The virus has impacted about 60 percent of the U.S. breeding herd, 28 percent of the Mexican herd and is beginning to develop in Canada, according to the report, released today with the title “This Little Piggy Cried P-E-D-v All the Way Home.” Overall U.S. pork production is anticipated to decline 6 percent to 7 percent in 2014, the most in more than 30 years.

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First discovered in the U.S. last spring, the virus can cause severe diarrhea and dehydration in pigs. While older hogs mostly end up losing weight after infection, piglets often die. PEDv can't be transmitted to humans or other animals, and has no effect on pork quality. The virus can spread rapidly throughout an entire population. The most common avenue is on livestock and farm equipment that come into contact with hogs positive with PEDv or their feces.

“In the U.S., we see the outbreak of PEDv causing a significant shortfall in the availability of market hogs in 2014,” reducing the slaughter for the year by 12.5 million animals, Rabobank Analyst William Sawyer said in a news release. "Given the ever rising number of PEDv cases reported, coupled with a six-month average lifecycle, the months of August through October are likely to be the tightest for processors, where slaughter could decline by 15 percent to 25 percent against 2013 levels,” he said.

In regard to productivity, 2014 will be a story of “the haves and have-nots,” Rabobank said in the release. Hog producers who experience mild cases of PEDv, or none at all, could realize margins of more than $ 60 per head, the highest calendar year average seen in Rabobank's 40-year record. Conversely, producers who have had difficulty eradicating the virus could suffer significant losses, Rabobank said.

Meatpackers have been faring well, with pork cutout prices rising much faster than hog prices. The gross margin for packers reached $63 per head this year, up from $37 this time last year. Profitability is likely to wane in the spring and summer, as prices continue to climb, testing pork demand, and hog shortages force packers to idle plants, Rabobank said.

The U.S. poultry industry will be the real winner in the PEDv situation, Rabobank said, as beef production is also expected to fall in 2014.

 “This implies an exceptional opportunity for the U.S. chicken industry as the protein of last resort,” Rabobank said. U.S. chicken production would have to rise by 8 percent to 9 percent to offset the shortfall from beef and pork, but a limited breeder flock and continued high demand for fertilized eggs from Mexico will keep supply growth restrained, it said.

As a result, chicken prices and margins are expected to climb this spring and summer, “yielding a very favorable year for the U.S. chicken industry,” Rabobank said.

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