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January 26, 2014
PEDV, PEDV, PEDV – It seems when it comes to every discussion or call lately with anyone involved in the swine industry it all starts with porcine epidemic diarrhea virus (PEDV). This disease is top of mind with any producer. The extraordinary measures that producers are using in terms of biosecurity or trying to figure out how they potentially got PEDV into their operation are unprecedented. PEDV can make even the best producers humble with a break, and we have seen this occur throughout the U.S. We have a lot to learn about this disease and what we can do to stop the spread of this disease going forward.
How much will PEDV affect Pork Supply for 2014? It is still too early to tell and we are still seeing breaks occur. In our opinion you will see the effects of PEDV in the southeast part of the U.S. in numbers from March through May. In the Midwest it will start in May since the breaks started occurring in the Midwest in November and it is still continuing because PEDV is still breaking. In terms of overall numbers, we could see an impact of 3-4%, but in terms of overall supply it could only be 1-2% because of higher slaughter weights. (See Figure 1). Since October of last year we have been at least 5 lb. heavier per hog sold. This will increase pork supply back by 2%. The summer of 2014 will be interesting to watch – last summer we did not have a lot of hot days, so weights did not drop as much as they would normally. If we have a hot summer in 2014, weights will be challenged to be 2-3% higher than a year ago.
So How High Can Hog Prices Go? Great question and the answer I will give is I have no idea. If you look at corn prices at $4.25 and summer hogs at a $100 we have a good opportunity to have very good profits for 2014. In looking at current economics for January, most producers are still losing money. The profit is yet to come. Taking some coverage for the spring and summer and locking up profits makes sense. If you are optimistic and think prices could go even higher than where the board is at today, consider using an option strategy. We are at potential margins that are as good as we have ever seen.
Risk Management and PEDV We have had a lot of discussions with producers on risk management with the issue of PEDV. This is not an easy decision. If all of a sudden your unit breaks and you have coverage on the board where you have no pigs because of a PEDV break, you could be in a bad spot. What we have tried to do is communicate with our clients and discuss their individual situation with them and then discuss what they believe is the best plan for their business. Ultimately, it is still their decision. However, with PEDV going beyond six months there is more risk.
Thank You to Minnesota Pork – On a personal note I want to thank Minnesota Pork for honoring me with the Distinguished Service Award. It was a great night for my family and the people that I work with at AgStar. The first thing I thought was how fortunate I have been to be associated and able to work with some of the nicest people anywhere. They are a dedicated and a passionate group of people. The last thing I thought was that we still have a lot of work to do. There are issues every day that are challenging the industry. We all need to keep working on making sure we keep the U.S. pork industry the best in the world.
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