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TECH FLASH

Rabobank says virus will cause two-year shortfall in North American hog market

The firm forecasts significant impacts from PEDv, including an opportunity for poultry to step up.

March 26, 2014
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PEDv to cut hog production

Rabobank Group says Porcine Epidemic Diarrhea Virus (PEDv) will cause significant two-year shortfalls in the North American hog market.

The firm’s Food & Agribusiness Research and Advisory team reports PEDv has already impacted 60 percent of the US breeding herd, 28 percent of the Mexican breeding herd and is “beginning to develop in Canada.” If PEDv spreads at a similar rate in Mexico and Canada as in the US, Rabobank says North American hog slaughter could decline by as much as 12.5 percent relative to 2013 levels. US pork production is expected to decline 6 to 7 percent in 2014, representing the largest drop in over 30 years.

Rabobank predicts a “haves and have-nots” situation in 2014, where hog producers experiencing little to no PEDv could see margins of over $60 per head—which would represent the largest margin in Rabobank’s 40-year record. Meanwhile, producers that have struggled to eradicate the virus could suffer significant losses given the high fixed costs of hog production.

The impact of PEDv is not limited to the pork industry, however. Rabobank expects the US poultry industry to benefit from a simultaneous 6 percent projected decline in 2014 US beef production and 6 to 7 percent decline in pork production.

“US chicken production would have to rise by 8 to 9 percent to offset the shortfall from beef and pork,” Rabobank says, “but a limited breeder flock and continued high demand for fertilized eggs from Mexico will keep supply growth restrained. As a result, Rabobank expects chicken prices and margins to climb this spring and summer, yielding a very favorable year for the US chicken industry.”

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