Spend Matters welcomes another guest post from Mark Kozlowski of Mintec.
Back in November, things looked good for pork lovers and there was optimism in the market. US pork production forecasts for 2014 indicated a rise by 4 percent, and prices had been falling since Q2 2013 due to falling feed costs and those higher production levels. Now here we are in February and the picture looks a little different.
Hog prices have increased, both in the spot and futures markets. And forecasts have been revised down to a much smaller increase of less than 1 percent. Many think there could be further drops to production forecasts, even to the point that there could be a decrease in production year-on-year. All this has been driven by the spread of the Porcine Epidemic Diarrhoea virus (PEDv).
Iowa is the largest producing state, accounting for over 30 percent of production. The pork industry has thrived in Iowa, helped by also being a key producer of the two main constituents of pig feed - corn and soybeans. It was in Iowa during the spring of 2013 that PEDv was first discovered in the US.
Since then, PEDv has spread to over 20 states and parts of Canada, with a surge of new cases occurring since the beginning of the year – roughly a third of the 3,000 cases were reported in 2014. The disease causes vomiting and diarrhoea in pigs of all ages. Although it is not fatal to grown pigs, it prevents weight gain and consequently has a very high mortality rate amongst piglets. Some estimates are predicting losses of over 4 million pigs in 2014.
The lower supply of piglets has led to speculation in the futures market and the spot price of hogs increasing by 7 percent since the beginning of January.
In the US, processed pork accounts for roughly 80 percent of the 8.5m tons of pork eaten each year. So whether you’re a fan of sausages, ham, or bacon, it could cost you more to get your fix of your favourite pork products in 2014.