The third quarter USDA Hogs and Pigs Report was considered bearish by the economists who participated in the National Pork Board’s teleconference last Friday. The estimates were higher than expected, but that scenario could change quickly, depending on what happens this winter with Porcine Epidemic Diarrhea virus (PEDv) and its sister, Porcine Delta coronavirus (PDCov).

“Across the board, all the numbers came in higher,” says Dr. Ron Plain, professor of agricultural economics, University of Missouri, Columbia, Mo. “This was a very bearish pig report.”

Producers Intend to Farrow More Sows
“The industry is making money, so one would expect farrowings to increase,” he adds. “Fall intentions are up 4 percent and Dec-Jan intentions are expected to be up 3.8 percent. Unless we continue to have pigs per litter down due to PEDv, we could see some big increases in the pig crop ahead of us, and a big increase in slaughter.”

In recent years, farrowing intentions have been a better predictor of where we’re headed than have the breeding herd numbers, says Plain. Though the health of the breeding herd and the pig crop through the colder winter months will determine how many more hogs we have.

Canadian Perspective
Kevin Grier, an independent livestock and meat market analyst from Guelph, Ontario provided an international perspective.

Canada saw its first PEDv cases in January of 2014. To date, it hasn’t had as profound an impact on the Canadian industry as it has in the United States. Whether the outcome was based on timing, better preparation, or a different reporting protocol, it’s hard to say. If Canada is hit hard with the virus this winter, we’ll know it was a timing issue.

“We’ve seen modest expansion in Canada,” says Grier. “What’s interesting is that our profitability has been similar if not better than that of U.S. producers. We’ve had about 1 percent expansion over the summertime versus last summer.”

Grier says the most significant impact, at least on a regional basis, is the bankruptcy of a major packer in Ontario. “We’re shipping more hogs to the U.S. than we were last year at this time.”

While export numbers are up slightly, Grier says, “Pigs are repatriated here:  Our Canadian packers have been doing a better job of keeping pigs on this side of the border.”

Anticipated Pigs per Litter
Daniel Bluntzer, director of research for Frontier Risk Management, Corpus Christi, Tex., also participated in the teleconference. He felt the biggest surprise was pigs per litter at 10.16.

“We fell 6-7 percent off our pigs per litter [because of PEDv]. If we plug in the new number going forward, we’re still not back to our long-term trend but with the increase in the breeding herd, we’ll see an enormous number of hogs – more than we’ve seen in a decade or so. Will this come to pass, or are those numbers too large? The numbers points to a lot more hogs compared to last year.”

Range of Error is Higher
Because of the uncertainty related to PEDv the range of error is greater, say the economists. How the winter will pan out from a health standpoint is anybody’s guess at this stage of the game.

What About the New Vaccines?
Two vaccines for PEDv are on the market, both with conditional licenses. “The new vaccines seem to be effective in helping sows maintain higher antibody levels. They appear to be more effective in sows that have had the disease than those that haven’t,” he says. “They should help us reduce the number of pigs lost to PEDv. I expect PED to be a seasonal problem for us but the vaccines are a positive step forward.”

Producers should know however, that the vaccines aren’t a “magic bullet.” Ramped-up biosecurity and careful planning for new introductions to the herd are important considerations.

We’ll Know More this Winter
The third-quarter report is probably the most difficult to analyze, say Plain and Bluntzer. “There’s just more uncertainty than we’ve had for a long time,” says Plain.

PEDv has had more of an impact on the U.S. hog population than could have been imagined a year ago, and it’s also had a larger impact. As a result, the range of error is higher.

“I would echo the trepidation on this report,” notes Bluntzer.

Price Forecasts
The economists’ price forecasts ranged from $89-100 for the fourth quarter; $87-97 for the first quarter of 2015; $90-100 for the second quarter of 2015; and $82-87 for the third quarter of 2015. Again, the uncertainty of PEDv’s impact this winter can’t be overstated.

Note of Optimism
Dan Vaught, senior economist with Doane Advisory Services in St. Louis, Mo., also feels the report is bearish. He says, “Current quotes for spring and summer 2015 CME futures are below those predicted for December 2014, which looks extremely bearish when one considers the size of the normal seasonal rebound from late-year lows, to highs the following summer. Moreover, the price spikes experienced in the March-April and June-July periods of 2014 were substantially driven by torrid demand from the domestic distribution chain and by export buying. 

“Even if circumstances prove less favorable next year, the market seems to be anticipating a stunning slump in demand,” he adds. “That seems rather unlikely in all but the worst conditions.”