ALTHOUGH porcine epidemic diarrhea virus (PEDV) is not fresh news, the number of new cases has accelerated (Figure), and the impact is starting to become more prevalent in the hog market.
The U.S. Department of Agriculture's Animal & Plant Health Inspection Service reported that the average number of new PEDV cases jumped from 141.2 in December to 220.5 in January. In addition, the agency indicated that the mortality rate for suckling piglets is 50-80%.
However, as noted in the Economic Research Service's "Livestock, Dairy & Poultry Outlook" for February, the PEDV numbers are understated because not every outbreak site is sampled and tested.
University of Missouri agricultural economists Ron Plain and Scott Brown are predicting that 80% of U.S. sows will be infected by mid-2014.
As a result of the disease continually spreading, USDA lowered its 2014 forecast for pork production to a total of 160 million lb. but anticipates that an increase in slaughter weights — prompted by lower feed costs — will likely offset the PEDV-related animal deaths this year.
Hog slaughter totaled 9.79 million head last month, down 2% from January 2013, according to the USDA "Livestock Slaughter" report.
U.S. pork faced its strongest international competition in its highest-value pork export market — Japan — which drove down U.S. pork sales in 2013, according to the U.S. Meat Export Federation (USMEF). For the third consecutive year, pork exports exceeded $6 billion but declined 5% in volume and 4% in value from the previous year.
For 2014, USDA forecasted U.S. pork exports to increase 3% to 7.4 million.
For the cattle sector, two major factors — low cattle inventories and lower feed costs — will offer beef producers the profit incentives they need to start expanding their herds, Purdue University Extension agricultural economist Chris Hurt said.
"While the incentives have turned positive, they have not been in place long enough for the industry to begin registering signs of expansion, according to U.S. Department of Agriculture numbers," Hurt said. "The rebuilding of the beef herd is expected to take multiple years."
Although recent numbers released by USDA reported a 2% increase in heifers held back for replacement, it will not be enough to increase beef cow numbers. The true growth in cow numbers depends on cow slaughter numbers.
This year, all eyes will be on cow/calf producers.
"Some cow/calf operations will see 2014 as the golden opportunity to get out with record-high cow prices, but the greater tendency will be for producers to hold on to the cows for the profitable opportunities that are expected over the next three or more years," Hurt said.
According to Hurt, expanding beef cattle numbers will be hindered by drought in certain regions; retaining heifers to replace breeding cows may be too expensive for some producers, and ranchers' confidence is not fully stored after dealing with narrow margins for multiple years.
The current significantly positive margins will motivate cattle feeders to feed cattle. A slight year-over-year increase in December feeder cattle placements is signaling a positive response from cattle feeders.
Still, low cow inventories do not necessarily mean less beef. Improvements in production technologies that have increased the output per cow means the U.S. cow herd does not need to be as large as it was in 1975.
Over the years, dressing weights of cattle have increased, partially due to genetic selection for larger weaning and yearling weights, which yield greater slaughter weights.
U.S. beef exports, according to the USMEF export report, continued to surge in December. Totals for 2013 rose from the previous year, up 3% in volume to 1.17 million metric tons and up 12% in value to $6.175 billion, shattering the 2012 value record. For 2013, U.S. beef exports equated to 13.2% of total beef production.
Despite growing demand in Asia, USDA forecasts U.S. beef exports to see a year-over-year decline of 10% in 2014 to 2.335 billion lb. as a result of high beef prices and a decline in production.
USDA expects a modest dairy herd expansion, which will increase milk supplies in 2014. In addition, the yield per cow is also anticipated to rise. However, higher milk production could pressure prices — both domestically and globally — later in 2014.
Last month, the number of milk cows on U.S. farms was 8.51 million head, which is 7,000 more than in January 2013.
Milk production was up 1% from last year to a total of 16.1 billion lb. from 23 major states as a result of increased production per cow — 17 lb. more than the previous year — and growth in dairy cattle numbers.
Overall, global demand for dairy products is expected to remain strong for the year, but increased production in competing European Union countries could limit U.S. exports in the last half of 2014.
Broiler meat production should continue to grow throughout this year, increasing 2.8% to 38.9 billion lb. The increase in broiler meat production is expected to come from higher bird weights at slaughter, which will be the result of lower feed costs rather than a large increase in the number of birds.
At the end of December 2013, broiler meat in cold storage totaled 644 million lb., down 1% from 2012, marking the first time cold storage holdings have declined since October 2012.
USDA estimated that 7.364 billion lb. of broiler meat were exported in 2013, and December 2013 shipments fell 8.1% from earlier in the year. For 2014, USDA is forecasting 7.5 billion lb. of U.S. broiler exports, with 1.825 billion lb. expected in the first quarter.
In the first half of 2014, turkey meat production is expected to be lower but then should rebound in the second half. The 2014 outlook for turkey meat production is estimated at 5.9 billion lb., up less than 1% from the previous year. Taking advantage of a decrease in feed prices, turkey producers are likely to grow out turkeys to heavier weights.
Last month, the national price for frozen whole hen turkeys averaged 99.8 cents/lb., which is up 4% from January 2013. Whole turkey prices should rise in the first three quarters of 2014 due to lower stocks at the start of the year.
In general, weekly prices for turkey parts and turkey meat products trended higher in January 2014, with the exception of breast meat.
The U.S. exported 758 million lb. of turkey in 2013, according to USDA, and the current forecast for 2014 exports is 780 million lb.
Table egg production is projected to increase in 2014 to reach 6.97 billion doz., a rise of 1.6%. The growth in production is likely to come from an increase in the number of hens and the rate of eggs produced.
Nevertheless, the increase in production will place downward pressure on prices. The wholesale price of Grade A large eggs in the New York market averaged $1.35/doz. at the beginning of this month. Prices are estimated to be marginally lower for the first half of the year and to continue to weaken for the remainder of the year.
Elsewhere in the livestock and poultry sectors last week, in the hog market, pork cutouts continued to climb upward, fueled by sharp gains in the retail pork sector.
Last Thursday, the pork cutout value surged upward by $2.72 to close at $97.68/cwt. The cutout has climbed $13.68 since the first trading day of 2014.
Sluggish movement of hogs is still being reported due to weather woes. Hog slaughter was 1.692 million head last week, which is 63,000 more than at this time last year.
Many market analysts are expecting higher prices in the summer hog market due to tight supplies. Last Wednesday brought the highest closing price for the June contract, which advanced 17 cents to $107.50/cwt.
High beef cutout prices during the first three weeks of January frightened away buyers, as indicated by the $25 decline from the Jan. 22 peak. However, the lower price level has piqued buying interest, according to Farm Progress market analyst John Otte.
All market regions continued to report light volumes due to extreme cold. Last week, live cattle sold at $142 for the southern Plains and at $142-143 in Nebraska.
Last Thursday, February live cattle futures closed at $144.60/cwt., up $2.00 from the preceding week.
Before the release of USDA's "Cattle on Feed" report last Friday, market traders estimated that it would show Feb. 1 cattle on feed in a range of 94.8-99.0% of year ago, January placements at 95.7-107.1% and January marketings at 93.2-98.0%, according to Otte.