Hogs, beef on rollercoaster ride

Hogs, beef on rollercoaster ride

Swings in hog market persist as market participants try to estimate actual supply of hogs available this summer.

Hogs, beef on rollercoaster ride
JUST as the weather has given the thermometer a workout over the past several weeks, the hog and beef markets have also been on quite the rollercoaster ride, leaving market participants wondering when the ride will end.

For the hog market, the issue to watch over the next several weeks is "the degree to which the animals that should have been marketed have, in fact, been marketed," Dr. Steve Meyer explained in the "Daily Livestock Report."

Using University of Minnesota information on infected herds, Meyer estimated that hog farms lost 2.5-3.0 pigs per sow, which will lower March and April slaughter 1.1% and 3.8%, respectively, from last year due to PEDV. Still, those numbers should get larger as July approaches.

Moreover, the actual federal inspected slaughter from March through last week was down 5.6% year over year (Figure). The U.S. Department of Agriculture estimated in its March report that slaughter was down 4.8% from March 2013.

Given these figures, Meyer concluded that producers are not current on their marketings.

Hog producers most likely delayed the marketing of finished hogs to add weight. The average liveweight of barrows and gilts in Iowa and Minnesota for the week ending April 11 was 285.5 lb., marking the third consecutive week of record-high slaughter weights.

 

PEDV reporting

Tom Burkgren, executive director of the American Association of Swine Veterinarians (AASV), told Feedstuffs last week that porcine epidemic diarrhea virus (PEDV) now has affected 31 states after two additional state veterinarians confirmed cases of the virus. This should be reflected in the next weekly case report.

The National Animal Health Laboratory Network is still diagnosing more than 200 positive cases per week. For the week ending April 12, 262 PEDV cases were confirmed, which makes the weekly average less than the previous month.

However, a sample can represent one pig on the farm or several animals in a herd, leading to concerns that the number of cases has been either underreported or over-reported as infected farms are being retested.

A coordinated industry and USDA effort to control PEDV has been ongoing since the first outbreak. Very early on, the topic of mandatory reporting was discussed.

Last week, Agriculture Secretary Tom Vilsack announced that USDA will start requiring reporting of PEDV and swine delta coronavirus in order to slow the spread of the diseases in the U.S.

In addition, USDA will also require tracking the movement of pigs, vehicles and other equipment leaving affected premises; however, movements would still be allowed.

"I think we are early in the discussion on mandatory reporting. We do not have a lot of details on what USDA is thinking," Burkgren noted.

In the news release, USDA said it will depend on swine veterinarians and industry leaders to assist in developing monitoring and control procedures. Details — like how often to test herds, required biosecurity procedures, herd-level control procedures and the qualifications to release a herd from the monitoring program — have yet to be determined.

Mandatory reporting is just one part of the brainstorming process to get ahead of the disease.

"The further we get away from the initial outbreak from last April and May, that data is probably becoming less useful," Burkgren explained.

A larger concern is how PEDV arrived in the U.S.

"We do not fully understand the pathway of entry for the virus, and accompanying that concern is that the pathway may still be open today," Burkgren said.

In addition, the open pathway may let in future disease outbreaks. Swine delta coronavirus came via the same pathway as PEDV, Burkgren explained.

Still, there is a learning curve with PEDV.

As a cousin to transmissible gastroenteritis, industry experts anticipate that PEDV will not spread as rapidly during warmer temperatures. However, Burkgren explained that an outbreak last summer in Oklahoma during a period of hot temperatures and low humidity proved that theory wrong. Eventually, only time will provide the answers.

At this point, using extensive sanitation practices, which include transportation and limiting entries onto farms, will remain of the utmost importance.

 

Global beef report

China will continue to lead strong global demand for beef, according to Rabobank's first-quarter 2014 global beef report.

In the report, the Rabobank Food & Agribusiness Research team said beef market fundamentals remain positive, with prices driven up across the globe in the first quarter by firm demand as well as further tightening supplies due to a drought-reduced herd in the U.S. and adverse weather conditions in Brazil and Australia — the three main beef exporters.

Combined with fluctuating exchange rates, these events have affected competitive positions in the export markets, with Brazil and Australia gaining export share in the first quarter at the expense of the U.S.

China will be the main driver of growth on the demand side. Although China's 2014 imports are not expected to reach the levels of 2013, they will grow as Chinese farmers take little interest in government-supported production expansion and strong profits and with the market opening for Australian chilled fresh beef products. China opening its market to Brazil's beef may be imminent.

"Prospects for the global beef industry remain positive in (the second quarter), with further possible upside due to continuing pressured beef supply and scarce supply of competing proteins, which will continue to impact competitive positions," Rabobank analyst Albert Vernooij explained. "Brazilian cattle prices and exports have surged to record levels, and Australian droughts have encouraged historically high slaughter levels to meet global demand."

Volatility was the biggest factor for the U.S. cattle complex in first quarter of this year. The report notes that the hog slaughter shortage — due to the spread of PEDV — could have a significant impact on overall meat supplies, strengthening beef demand during the upcoming grilling season.

Slaughter levels are at historically high levels due to poor climate conditions in Australia, but strong international demand supported record boxed beef exports in the first quarter of 2014.

In Brazil, domestic and export demand will remain strong and result in firm cattle prices in the next quarter. In addition, the World Cup and presidential elections should boost domestic demand in Brazil, while exports will be driven by the continued depreciation of the U.S. dollar.

In Argentina, government limitations on exports will keep  beef exports low, which is an attempt to keep domestic meat prices low.

New Zealand's export prospects are positive, with strong demand likely from the U.S. and China. However, the New Zealand dollar's relatively high value continues to put downward pressure on returns, eroding international competitiveness.

A long and extremely cold winter for Canada increased feed usage for the country's beef producers. Increased feed costs, in conjunction with cattle shipments to the U.S., means Canada is rapidly going through its available cattle supply, with no intention of expanding the herd.

Mexico's beef sector will continue operating under tight margins into the second quarter as beef and cattle prices remain high and consumption remains lackluster.

Prices are expected to hold firm at current levels in the European Union. The supply of cattle will remain stable, while import growth will increase steadily at about 10%, according to the report.

 

Market roundup

Cash hog prices finished lower last week after giving back their Tuesday gain. The average price for the eastern Corn Belt was $118.56/cwt., down 61 cents from the previous week, and the western Corn Belt was $115.65, down $2.69.

Pork cutout values declined last week and settled at $120.08/cwt. The cutout values appear to be readjusting from record-high prices all year. For now, the peak of $133.74/cwt. was in on April 2.

In general, lean hog futures were erratic last week. April lean hog futures settled at $123.50/cwt. at last Thursday's close, down $1.425 from the previous Friday.

In the cattle markets, wholesale beef cutout values rose steadily last week. Beef demand should lift as the observance of Lent comes to a close and grilling season begins. The boxed beef cutout value for Choice carcasses was $225.88/cwt., up $3.76 from the previous Friday, and the Select carcass cutout was $215.43/cwt., up $2.97.

For cash fed cattle sales, USDA reported limited trading on light demand last week, and there were too few sales to establish a market trend. For all feeding regions, the cash trade ranged from $146 to $150/cwt., with the highest bids in the northern Plains.

The cattle futures climbed last week until making a slight retreat at the close of markets last Thursday. April fed cattle dropped $1.55 to $144.20/cwt., down 0.4% from the previous Friday.

Volume:86 Issue:16

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