The ongoing PEDV outbreak is not going away.  Indeed, it seems to worsening somewhat, as indicated by the fact that the number of farms reporting cases reached a fresh high at 301 during the week ended Feb. 8.  The general increase in the affected farms implies persistently low supplies through much of summer at this point.  Moreover, there seems to be no end to the problem in sight.

Check out this chart:

Industry expectations for reduced supplies are almost surely supporting CME futures at very high levels.  The nearby April future ended Wednesday at 97.20 cents/pound, about 8.75 cents premium to the latest cash equivalent quote despite a history of late-winter cash weakness, which exemplifies this phenomenon.  Summer futures trading in the 105-107 cent range also illustrate the market’s underlying bullish bias, although a big portion of those premiums incorporates a sizeable seasonal advance as well.    

It seems much too early to think about summer prices falling short of expectations, but the cash markets’ ability to justify the April premium is very much open to question.  That’s seems particularly true when one recalls that cash prices have already climbed 9.25 cents from their Christmas Eve low.  Again, this is the main reason we boosted short-term price protection late last week.