by Agrimoney.com
US officials are hugely undererestimating, by some 1.7bn pounds, the dent to US pork output from porcine epidemic diahorrea virus, a reported from Rabobank showed, adding that chicken producers have an "exceptional opportunity" to exploit the outbreak.
The bank warned that US pork output will fall by 6-7% this year, the biggest drop in 30 years, because of the outbreak of porcine epidemic diahorrea virus (PEDv), which has mortality rates of up to 100% in piglets of less than three weeks, and slows weight gain in older animals.
Hog slaughter numbers will actually fall by 11% this year, although the impact will be offset in part by higher weights, as producers exploit the high pork prices caused by the virus, at a time when feed costs are relatively low.
"We see the outbreak of PEDv causing a significant shortfall in the availability of market jogs in the US this year, to the tune of 12.5m hogs," the bank said in a report.
Peak months
Rabobank's estimate of US pork production of 21.65bn pounds this year is significantly more gloomy than the US Department of Agriculture's forecast of 23.38bn pounds, a rise of 0.4% year on year.
However, the bank cautioned that even assuming that the spread of the disease – which is favoured by the cold weather that the US has had – peters out as temperatures warm up, the impact of PEDv on slaughter weights is nowhere near its peak.
"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," in terms of slaughter, which will decline by 27% year on year in September, compared with a March decline forecast at 5%.
The comments come ahead of a much-anticipated quarterly USDA report on Friday into the US hog herd, which is expected to throw more light onto the impact of the disease.
'Changed the sentiment'
The rate of new findings of PEDv has plateaued at about 300 cases per week, coming in at 296 cases from 24 states in the week to March 15, according to the American Association of Swine Veterinarians.
It is now spreading through Mexico too, where the report forecast a 9.7% drop in pork output this year, comprising a drop of 7.5% in slaughter numbers plus lower weights.
"PEDv has changed the sentiment of the Mexican industry," dashing a "positive" outlook for the industry which had existed, buoyed by higher animal prices and lower feed costs, Rabobank said.
The bank forecast a "significant shortfall of hogs in 2015" in Canada, where the first case was found in Ontario in January, but fell short of putting a number on the decline.
'Exceptional opportunity'
The big gainers of the outbreak, in the US, are pork producers whose herds have not been infected, who are now looking at margins of more than $60 per head, the highest in at least 40 years.
Packers have seen a jump in gross margins to $63 per animal from $35 per animal at the start of 2014, "as the fear of possible stock-outs" has lifted prices of wholesale pork faster than those for hogs themselves.
However, the "real winner" of the outbreak is the US poultry industry, offered an "exceptional opportunity" as chicken becomes the "protein of last resort", with a squeeze on beef production meaning it will prove unable to pick up the slack.
"US chicken production would have to rise by 8-9% 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 constrained.
"As a result, we expect chicken prices and margins to climb this spring and summer, yielding a very favourable year for the US chicken industry."
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