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Mikkel Pates, Forum News Service, Published February 13 2014

Deadly pig disease likely to spur supply shock, benefit producers

JAMESTOWN, N.D. – It’s called Porcine Epidemic Diarrhea – PED virus – and it’s going to have an impact on hog producers in 2014 and 2015, whether their farms get it or not.

PED was a new disease for U.S. hog producers in 2013 and was a major topic at the 42nd annual convention of the North Dakota Pork Council in Jamestown on Feb. 4.

Despite devastating losses of piglets from the disease, it will likely create a supply shock that will benefit producers, even if they suffered losses and especially those who can keep the virus out of their operations.

PED virus was first identified in the U.S. April 15 and has since been found in 22 states where it has killed millions of pigs and cost untold dollars. It is not a “reportable” disease, so numbers aren’t known, experts say. In the most recent reports, North Dakota hasn’t acquired the disease. Minnesota, South Dakota and Iowa have gotten it. Canada has it, in Ontario, but not so far in Manitoba. The virus will be preserved by low temperatures, and survives better away from a host.

David Newman, North Dakota State University Extension swine specialist, says his major concern is keeping PED out of the state’s sow barns, which could knock hundreds of thousands of pigs out of the market.

“That’s the risk,” Newman says.

On the flip side, producers using good biosecurity and management might be able to keep the disease out of North Dakota. Those who can keep the virus out will benefit from the fact that pigs have died elsewhere, improving profits in 2014 and 2015. Even those who suffer losses will also have the offsetting benefit of higher prices.

Increasing kill weights

Some producers are increasing harvest weights to make up for lost pounds.

Steve Meyer, founder of Paragon Economics and a former director of economics for the National Pork Producers Council and the National Pork Board, says PED will cut production, but that will mean higher slaughter weights of 1 to 2 percent as producers try to offset the pounds they can’t market because of pig deaths.

“Profits forecast this year at $27 per head would be the best year since 1990,” Meyer says, basing forecasts on futures markets. PED will cause production losses for individual producers, but the demand for pork is “inelastic,” meaning if the supply is cut by 1 percent, the price goes up by more than 1 percent – probably 1.5 percent.

“If this happens to everybody, what happens to revenue? It goes up,” he says.

“For any individual farm that gets PED, it’s devastating,” says Tom Burkgren of Perry, Iowa, director of the American Association of Swine Veterinarians, in an earlier, separate interview with Agweek. “You lose 100 percent of production for four or five weeks. Any baby pig less than three weeks of age is going to die. By 12 weeks, you’re back to 100 percent.”

Unknown transmission

Burkgren says the virus came from China and is concerning for several reasons.

“First, we don’t know how the virus came in, so the pipeline is open for other viruses,” he says. He says it’s also a new virus, so there’s little research on it and it takes time to learn about the bug, especially how it’s transmitted.

Some officials at the state convention say the disease is starting to show up in some “show pig” events, but Burkgren says otherwise. The Fall Classic show and sale in Oklahoma had thousands of pigs. A research study at the event looking for the virus on trailers coming into the show didn’t show any indication of it, he says.

Looking past the PED crisis, Meyer says the hog industry generally is suffering from a lack of packing capacity, as plants have shut and people continue to desire pork. That’s opposite of the situation in the beef industry. He says the PED virus will cut numbers in 2014 so the capacity problem will be “kicked down the road.”

In his market outlook summary, Meyer identified these trends:

• Lower feed costs will cause livestock production expansions, especially in pork and chicken.

• Demand is good, with macroeconomic conditions improving. Data show consumers desiring meat and a willingness to pay for it.

• Beef supplies will be tight for 2015.

• Chicken is much more competitive in price this year. Pork will have tighter supplies because of PED.