Although the December report provides some evidence that PED may be affecting breeding herd efficiencies and contributing to lower market hog inventory numbers, the disease’s potential —a very real one—to reduce pork production in early 2014 is not significantly reflected in animal numbers reported in the December report.
Moreover, other factors, such as producers’ farrowing intentions and sharply higher live weights, point to higher pork production in 2014. The December report indicates that producers intend to farrow 1.4 percent more females in the first half of 2014. Continued higher farrowings in 2014, combined with relatively slow growth in litter rates, is expected to result in a 2 percent higher pig crop for the year. Moreover, lower feed costs and excess barn space—perhaps another consequence of PED—are providing significant incentives to producers to add weight to slaughter hogs.
USDA data on live weights of Federally Inspected hogs for slaughter show that since 2000, the average gain in slaughter weights between June and December averaged 3.62 pounds. In 2013, live weights of FI slaughtered hogs increased by 9.25 pounds (see figure below).
So, while estimated commercial slaughter numbers are expected to increase only fractionally in 2014, higher average dressed weights are expected to contribute to increases in pork production of just under 2 percent in 2014.
Average prices of 51-52 percent lean live-equivalent hogs are expected to average $61-$63 per cwt in the first quarter of 2014, about 5 percent above the same period last year. Although hog prices are expected to decline almost 3 percent year-over- year for 2014, quarterly feeding spreads—calculated with expected (USDA) prices of corn, 48 percent soybean meal, and 51-52 percent lean live-equivalent hogs—are positive, suggesting that lower feed costs will more than offset year-over-year lower hog prices in 2014.
Source: Livestock, Dairy and Poultry report