Positive economic outlook for US pork producers

The economic stars are aligning for U.S. pork producers in 2014, despite the challenges and supply problems caused by the porcine epidemic diarrhea (PED) virus epidemic that is severely impacting the industry. That's the opinion delivered by Steve Meyer of Paragon Economics at the World Pork Expo in Des Moines, Iowa, June 4.
The optimism is fed by current high pork prices and the downward shift in feed prices. Meyer said the current outlook for the U.S. corn crop is good, with rapid planting making up for late spring. "The percentage of corn planted is right where it should be for early June," said Meyer. "There is still the summer to get through without a drought, but with reasonable weather, I would look for harvest corn prices in the $4.20 to $4.15 range. A really good crop could take the price below $4." 
While corn prices are favorable, soybean prices have stayed high, and Meyer sees continued high worldwide demand and prices for soybeans and soybean meal this summer. 
Meyer said the improved feed situation is partially because there is 50 percent more corn produced outside of the U.S. than in 2007, and the same thing is now happening with soybeans. "There was consternation last year about us importing corn, but that's a positive thing," said Meyer. "Increased production in South America is going to help feed consumers in this country in certain situations." 
Meyer said high pork prices have been driven by demand. "Meat demand is good, despite the economy. Consumer preferences in meats has picked up in the last year. There have been changes in consumer viewpoint toward meat, and that is good for pork, chicken and beef."
Meyer said that while meat demand is up, chicken production has not risen this year and beef production is still down. All of that works in pork's favor. 
Meyer also touched on the impact of the PED virus epidemic. He said that so far the industry has been making up for the slaughter of fewer pigs with higher slaughter rates, but the number of head ready for slaughter will continue to drop through the summer, so supply could get tight. "The May slaughter rate was down 6 percent compared to previous year, and that number will drop all summer," said Meyer. 
As the number amount of losses to the PED virus has dropped in recent months, the slaughter numbers will climb in the fall, but Meyer said the sow herd is not growing right now, as producers are trying to figure out the long-term impact of the PED virus. 
"We haven't had good numbers for how many pigs we're losing to PEDv," said Meyer. He thinks the move to make it a reportable disease that will be tracked by the USDA will help the industry plan. He estimates that 7 million pigs have been lost to the PED virus since May of 2013.
"The industry could raise production by adding sows, but if they come up with a vaccine we will have oversupply," said Meyer. "So people are waiting to see what is going to happen."