USDA: PEDV ‘absent,’ pork prices plunge

(Editor’s note: Today’s Cooperative Extension article was submitted by Max Knowles and taken from News article for week of “Meatingplace” online magazine and written by Chris Scott on May 20, 2015.)

Hog slaughter numbers are rising, and the Porcine Epidemic Diarrhea Virus (PEDV) that plagued the industry is “largely absent,” according to figures from USDA’s latest Livestock, Dairy and Poultry Report.

USDA adjusted its second-quarter estimated commercial hog slaughter to account for higher-than-expected weekly hog slaughter in April and early May. While typical seasonal patterns are expected to prevail in May and June, slaughter numbers will likely be higher than initially forecast — about 5.8 percent higher than the second quarter of 2014.

Prices are expected to average $49 to $51 per cwt, 42 percent below a year ago. On the positive side for hog producers, PEDv appears to be largely absent as a production factor so far this year, and moderate feed costs will likely continue to take some of the sting out of lower hog prices, USDA said. For packers, the start of grilling season, high beef prices, and prospects of a somewhat improved export prospects make for a more positive outlook following a recent spate of low wholesale pork prices.

Expansion of U.S. breeding inventories in 2015, largely in response to extraordinary PEDv-driven producer returns in 2014, are expected to result in larger 2016 pork supplies and lower hog prices. On the other hand, prices are expected to be under pressure which, in turn, is expected to benefit domestic consumers and to boost U.S. pork export volumes.

Industry expansion should lift 2016 farrowings modestly above levels in 2015. New technologies, genetic improvements, and better herd management are expected to raise 2016 litter rates closer to historical trends. And, average prices of live equivalent 51-52 percent lean hogs in the first quarter of 2016 are expected to be $45-$49 per cwt, about 3 percent below prices in the first quarter of 2015. For 2016, hog prices are expected to average between $44-$48 per cwt, about 5.4 percent below prices this year.

Larger pork supplies next year and the lower prices that accompany them are expected to add impetus to U.S. pork exports. While the appreciated U.S. dollar will likely continue to function as a tax on exported U.S. goods, lower pork prices may offset some of the drag.

Exports in 2016 are expected to be 5.125 billion pounds, 5.3 percent greater than the forecast for this year.

It is notable that so far in 2015, U.S. exports to Mexico have continued to climb despite the depreciated value of the Mexican peso against the U.S. dollar. A possible explanation is the relatively low year-over-year prices of U.S. hams thus far in 2015. In turn, the recent declines in U.S. ham prices may be linked to the reduced purchasing power of the Mexican peso. A significant component of U.S. pork shipments to Mexico are fresh bone-in hams. The low value of the peso versus the dollar may have tempered Mexican demand for these hams until ham prices declined enough to offset exchange-rate effects and keep U.S. pork products flowing to Mexico.

Meanwhile, larger domestic pork supplies are expected to reduce U.S. import demand next year. In 2016, U.S. pork imports will likely total just over 1 billion pounds, 13.4 percent below imports this year.