What is in this article?:
• One common explanation of the recent low slaughter numbers is that death losses from the PED virus (porcine epidemic diarrhea) has reduced the market herd much more than had previously been thought.
• However, there are other explanations that need to be considered.
Sow slaughter down
In addition, preliminary data suggest that sow slaughter during the most recent seven weeks is down over 20 percent from the same period in 2012 when drought panic greatly influenced behavior.
The higher than expected USDA numbers cannot be dismissed as unrealistic. While there is no national report detailing the losses from the PED virus, the best information the market has is the USDA inventory counts in the Hogs and Pigs report.
USDA has a near-census of large operations that are accounted for and surveyed over 7,500 producers for the current report. The USDA inventory count suggests that the recent low slaughter rate will give way to about unchanged slaughter in late October and then about one percent higher slaughter numbers in November and December.
For 2014, slaughter numbers should be up about one percent in the first quarter and then move two to three percent higher in the spring and summer. Weights should be higher as well.
Lower feed costs are the most important part of the profitable outlook over the next 12 months. Eastern Corn Belt prices on a live basis are expected to average in the mid-$60 in the final quarter of this year and first quarter of 2014.
Then spring and summer prices are expected to move into the mid-to-higher $60s. Costs are estimated to be about $57. This will provide expected profits of over $20 per head. These profits will roughly offset similar losses that were experienced due to the drought of 2012.
Ultimately it will take the next several months for the market to sort out the impacts of the PED virus. Meanwhile, the USDA numbers cast a less optimistic tone to prices.