Category Archives: Hogs

Canadian Hog Issues Could Benefit US Producers

Canada’s hog industry is currently facing a host of problems that could end up being a big benefit for US producers. Much like the US, the country is suffering from a supply shortage that stems from the PED virus. The US mostly relies on Canada to supply young feeder pigs, but Canadian supplies are short, with sows and gilts down -25% from where they were ten years ago. With lower supplies coming from Canada, live pig prices in the US could well see an increase. That will be especially so if PEDv hits again this winter. Canada was not impacted by 

the virus nearly as bad as US producers were last year, but they’ve had cases already showing up in Eastern Canada and there are worries they could suffer a larger outbreak this year, which would further limit available exports to the US. Even without the threat of disease, expanding the Canadian herd will be a lot easier said than done. The country has implemented some very restrictive policies lately. In number one US pig supplier, Manitoba, hog farmers are required to install an anaerobic digester before launching any expansion plans. The digester basically breaks down organic material in order to reduce phosphorous and nitrogen runoff into Lake Winnipeg. The systems are prohibitively expensive though, from what​ ​I have heard it runs about $800,000 plus. As you can imagine, this expensive requirement has pretty much brought herd expansion in the province to a grinding halt. The country’s exports of pork products have been impacted by the Russian import ban, but not as much as anticipated. A lot of the lost volume has been made up by higher China, Korea and Mexico imports​​. Lower export demand could be a blessing in disguise for Canadian processing plants when it’s all said and done​ though​. New federal regulations on hiring temporary foreign workers is hitting packers fairly hard, leaving most extremely understaffed. Without enough workers, resulting production is a fraction of most factories’ output capacity. The government in June began capping the number of foreign workers that were allowed to make up a company’s work force at 30%. They also implemented a $1000 fee for temporary worker applications and cut in half the length of the stay granted for workers under the program. Some companies have been forced to shift that capacity to US plants in order to fill contracted orders, a trend that is expected to continue, especially since the cap on foreign temporary workers will fall to just 10% in the next couple of years. Moral of the story, if Canadian producers have to start turning away new business, the next logical place buyers will be turning is to US suppliers.

Inside Details On The US PEDv Outbreak

 

According to a new report from Business Insider, it took nearly 30 days and hundreds of pigs dying in six states for swine veterinarian Bill Minton to learn that a farm in western Ohio was ground zero for this virulent, fast-spreading virus that had never been seen before in the US. This is because — initially — the lab results came back with no indication of what had killed them. Fast forward a year later, and the disease called Porcine Epidemic Diarrhea virus (PEDv), has wiped out an estimated 10% of the US pig population, helped push pork prices to record highs, and raised questions about US oversight of the livestock industry. According to reports, the USDA still has yet to ascertain exactly how PEDv entered the US. The USDA is actually coming under fire for waiting a year to require farmers to report outbreaks to the government. Its said that the agency could have better tracked the spread of PEDv by insisting earlier that veterinarians report outbreaks. By now, mandatory reports may not help control PEDv because the disease has already spread to 30 states. Looking back at the first case in Ohio, Monton was not able to identify PEDv for weeks because he initially thought the virus was a different disease called Transmissible Gastro-enteritis (TGE). Veterinarians across the country drew the same conclusion when handling early outbreaks because PEDv had never before been seen in the US. In the past year, researchers have learned that PEDv, which causes diarrhea and vomiting, thrives in cold, damp conditions, and likely originated in Anhui province in China. It can be transmitted from pig to pig, by contract with pig manure, and from farm to farm on trucks. Even more discouraging is the fact that farms can suffer more than one outbreak, meaning eradication may prove more difficult than many first assumed. The USDA launched a general review in late 2013 of how swine viruses enter the US. It does not focus on PEDv but the virus would have entered in the same manner as other diseases. What’s interesting, initial results indicate it is more likely for people than feed to carry in hog diseases because viruses in feed often die during long trips on hot cargo ships. One way that humans can transmit the virus is on their shoes. What’s clear is that the lack of understand about the transmission is creating some very real fears throughout the US pork industry. At the World Pork Expo yesterday in Iowa, Ag Secretary Tom Vilsack announced there were FINALLY guidelines in place for reporting new cases of PEDv and other swine enteric coronovirus diseases (SECD). You can find details here.

A Look Inside Chinese Hog Production

First you have to realize over 50% of the world’s pig population is raised in the Chinese borders. Next it’s important to understand how big of a hit and major losses that hog operations are enduring.  Back in mid-January I was hearing reports that profit margins for a farrow to finish operation was running 50 RMB/market pig ($8.00 USD/market pig). By mid to late-Feb I was hearing losses for farrow to finish operations at around 200 RMB/market pig (about $32.00 US/ market pig). By mid-April I was hearing loses were around 360 RMB/head ($58.00 US/ market pig). There was even talk from several inside sources that losses on newer, more leveraged operations were closer to 400 RMB/head ($64.00 US/market pig).  I couldn’t tell you where the Chinese hog operations are headed from here, but I did want you to see some actual numbers and facts in regard to what has been happening. You have to believe as the losses pile up they will ultimately have no choice but to cut back on production in some capacity which will obviously impact feed demand.

Q. What Is Happening In The Hog Market?

A. There has been a ton of questions surrounding the recent 50% jump in US hog prices. The consensus and fear seems to be that the US pork production could drop by the most in 30-years due to the porcine epidemic diarrhea virus (PEDv). There is a wide array of guesses floating around right now in regard to how many hogs will be lost, but from what I continue to hear, slaughter could drop by anywhere from 15-20 million head in the next 12-24 months. There is some additional fear associated with worries that the PED virus spreads deeper into Mexico and even further into Canada. Keep in mind PEDv has now been identified in 27 US states, reaching as far south as Texas and Arizona and as far north as Montana, North Dakota and Minnesota…. Bottom-line, the virus seems to still be spreading and may be spreading in an even larger fashion to both our neighbors to the north and the south. The virus was first identified in Mexico last summer and seems to be taking a similar path to how it spread here in the US. In Canada, the virus has first identified just a few months ago but has recently been found in Quebec, Manitoba and PEI, but has largely been concentrated in Ontario, where it has now been reported on 35 farms…NOT GOOD! Processors here at home are currently estimating supplies will be the tightest during the Aug-Sept-Oct timeframe. In other words, I am thinking we still haven’t seen the top in hog prices and the severity of this virus may continue to grow. While hog producers who have NOT been hit hard with the PEDv virus are enjoining large profit margins , others are left hemorrhaging and feeling the massive pain. In fact there is talk this could be a defining moment for US producers, and a period of time when several hog operations are forced out of business. On the flip side there is talk that poultry producers will enjoy huge gains as chicken is called upon to replace the shortfalls in both pork and cattle. Moral of the story, keep your seatbelt on because I don’t think this wild ride is anywhere close to being over. The map below shows the number of cases in each state confirmed by the National Animal Health Laboratory Network.

Interesting Note: Smithfield recently announced it was going to cut back to four days a week in it’s Tar Heel, NC processing plant due to the setbacks and impact of the PEDv virus. Keep in mind, the Smithfield plant in Tar Heel, NC is the largest pork processing facility in the US and is thought to slaughter somewhere between 30,000-34,000 hogs each day. I have also heard talk that Smithfield might also reduces production in it’s Clinton, NC plant. Others are telling us that Hormel, Cargill and JBS are also talking about cutback plant hours.

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