The wild ride of the hog markets has continued over the last 30 days with futures and cash peaking in late March and retreating after the bearish Hogs and Pigs Report.
With the decrease in futures and high cash hog prices over the last month, we’ve seen a lot of margin return to hedge and operating lines.
The realization of high cash hog prices during the last month has helped as well. Producers are certainly feeling better when they are receiving $260+ per head for their market animals.
The question remains, “Do you believe the Hogs and Pigs Report, and does anyone really know how big the whole impact from porcine epidemic diarrhea virus (PEDV) will be?”
We see a lot of data, and it certainly appears PEDV breaks have exceeded 50% of the U.S. sow herd.
However, at the same time the instances of porcine reproductive and respiratory syndrome (PRRS) virus have dropped to what appears to be half of the historical average.
No one knows how these numbers will play out, and this is apparent in the volatility in the hog markets. It does appear that increased biosecurity because of PEDV, along with regional programs to reduce PRRS, have really limited the spread of the PRRS virus this winter.
This is all playing out and creating a market dynamic we have never seen before. Communication with your lender has never been more important.
This environment also reinforces the importance of understanding your packer contract and risk related to non-delivery. All of these issues are vitally important, but what else out there should we be concerned about?
The thing that keeps me up at night is the possibility of a foreign animal disease. PEDV is bad from a production standpoint, as producers hate dealing with anything they can’t easily control.
This pales in comparison to the effect of a foreign animal disease, however. Although producers hate this new disease, PEDV has provided the opportunity to capture the highest margins ever and the reality is that we are in business to make money.
A foreign animal disease would not only be devastating to livestock production, but would also immediately jeopardize our export markets resulting in a devastating impact on profitability for anyone in hog production in the United States.
It is important for producers to support efforts to look at traceability of feed ingredients and other products imported into the U.S.
Massive amounts of amino acids, antibiotics, vitamins, enzymes, and others are imported from China that have the possibility of carrying something along with them on their way into the country.
It looks like we have three new viruses that were introduced within the last year that appear to be of Chinese origin. If these got in, could the next one be a foreign animal disease?
That’s a scary thought, but efforts are underway to examine those causes and, no doubt, of any country in the world we probably have the best chance of closing the hole wherever it might be.
It will be interesting to see how quickly we can identify these channels and how this may impact the spread of PEDV around the world, as this disease has not been limited to the U.S. and Canada.
There are actually a pretty large number of countries that have identified their first cases of PEDV in the past 12 months.
For now things still look very good for producers’ bottom lines over the next 18 months.
Although, there are still significant management challenges with which to contend.
We’re still the low cost producers and so long as we can maintain that position and provide an exceptional product, the industry will succeed.
To help maintain this position, all of us must also continue to advocate for our industry and provide a positive voice.