Despite a dramatic increase in hog prices during the second half of February, slaughter data indicates that supplies of hogs were ample. Estimated federally inspected (FI) hog slaughter during the last 2 weeks of February was about equal to the same period last year. The supply of slaughter hogs, then, does not appear to be what pushed late February average prices of 51-52 percent lean hog prices 13 percent higher than a year ago.
Another possible factor contributing to year-over-year higher hog prices in February might have been a more rapid than usual rate of stocks accumulation, in anticipation of PEDv-induced product shortages later in the year.
With only February beginning stocks data currently available, what is known is that while the total February pork beginning stocks of 624 million pounds were above both the 3-and 5- year averages, the pork industry has been carrying higher stocks since January 2012. What is noteworthy is that rates of change of February beginning stocks were well in line with past month-to-month changes, as well as year-over-year changes, and were consistent with lower hog prices at the beginning of February.
Despite elevated market attention to PEDv for the last 6 months, February pork beginning stocks had not accumulated faster than seasonal averages. USDA will publish beginning March pork stocks on March 21.
Demand may also be a factor pushing hog prices higher in February. Estimated pork production, and hog and retail meat price data for February, suggest that consumers are substituting pork products in place of high-priced beef.
Estimated FI pork production in February—roughly 1.8 billion pounds—was more than 4 percent greater than FI pork production a year ago. February hog prices were almost 4 percent above a year earlier, with the same number of slaughter days in February 2014 as in February 2013. Although year-over-year comparisons of mandatorily reported wholesale prices cannot yet be made, strong packer margins during February would imply that wholesale pork prices increased as well. With wholesale Choice and Select grade beef boxes priced at $200-plus since early January, and retail beef prices at $5.35 per pound in January, consumers may be moving to pork as a less expensive alternative.
It is noteworthy that the ERS retail broiler composite was below a year ago in February (-0.05 percent), while estimated February broiler production was greater than a year ago. All this suggests that high beef prices are inducing most consumers to alter their animal product consumption patterns: less beef, more pork (at higher prices), and more poultry (at flat-to-lower prices).
PEDv-reduced hog slaughters have been “…just over the horizon” for some months. Clarity will be provided by the March Quarterly Hogs and Pigs report, to be released by USDA on March 28.
The report will provide hog and pig inventories as of March 1, and litter rates for the December-February quarter. The figure aboveshows weekly positive PEDv accession data from the website of the American Association of Swine Veterinarians through mid-February.
New reported infections through February 16 averaged 310, while in January the average was 237.8. USDA lowered second- and third-quarter hog slaughter and pork production fractionally, leaving the total pork production for 2014 at 23.4 billion pounds, an increase of about 1 percent over 2013.
Hog prices are expected to average $68-$72 per cwt in the second quarter of this year and between $65-$69 for 2014. Higher domestic pork prices are expected to limit pork exports in the second half of 2014. U.S. pork exports are expected to be 5.1 billion pounds, an increase of almost 1.5 percent over 2013.
Source: Livestock, Dairy and Poultry report