Pork prices recover from PEDv-induced spike, report says

By Spencer Chase

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, April 28, 2015 - After the Porcine Epidemic Diarrhea virus (PEDv) ravaged American hog numbers and supply, a recent report shows that the elevated prices that resulted may be coming back to earth.

The report, by Rabobank, points to “robust global supply growth” driven by production increases in Brazil, Russia, and the U.S. and “rather subdued demand” as the main reasons for the price drops. High stocks in importing countries also aren't helping prices, Rabobank said in its Pork Quarterly report. The report, which focused on prices in the first quarter of 2015, showed a 40 percent drop in global pork  prices from historic highs in the summer of 2014.

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Steve Meyer, president of Paragon Economics, said last year's prices were “artificially high due to PEDv,” making the drop in prices look especially sharp.

“The dramatic comparisons to last year are part of what's kind of shocking about this,” Meyer said in an interview with Agri-Pulse. “If you put them in a more long-term historical context, (prices are) not terribly low, and if we look at the futures market, they're actually still profitable for this year because costs are significantly lower as well.”

While high supply and weak demand is the story globally, PEDv remains a key market driver in the U.S. The disease, which first surfaced in the U.S. in 2013, has been responsible for more than 8 million deaths in the pork industry, mostly of piglets. To cope with lower supply, some producers increased the size of their hogs before going to market, which the report said exacerbated the oversupply situation.

“Hog weights, which helped to offset the shortfall in slaughter last year, started 2015 above prior-year levels,” the Rabobank report said. “Hog weights have declined in recent weeks and are currently in line with 2014 levels. We expect weights to drop below 2014 levels this summer.” 

U.S. pork exports also suffered as the result of a slowdown at West Coast ports due to a labor dispute settled in late February. The slowdown hurt many facets of agriculture but was especially hard on the pork industry, creating a glut of supply intended for Asian markets, but no way to get it there. Exports of the meat in January were down 25 percent, largely due to reduced shipments to Japan and Southeast Asia.

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Meyer said while prices are lower at the farm and wholesale levels, the lower prices have yet to reach the retail level, which usually takes more time. However, he said there is some profit-taking occurring. “If you're making money, you're not going to reduce those prices any faster than you have to,” he said.

He said competition would be a major factor in lowering retail prices and predicted those prices would drop later in the spring. In the meantime, he said consumer preference and willingness to pay higher prices for pork was a good sign for the industry.

“These strong retail prices and the volume of product that we're moving in the United States right now indicate that consumer-level demand is still very good,” Meyer said. “That's a real positive here. We would be in a lot worse shape if we didn't have the kind of strength of demand that we've seen over the last couple of years.”

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