PEDV Will Continue to Boost Pork Prices Throughout Summer

PEDV, African swine fever impact pork supplies, pushing up prices, Rabobank says

Published on: May 7, 2014

Porcine Epidemic Diarrhea Virus will continue to tighten pork supplies throughout the remainder of the summer, Rabobank's Food & Agribusiness Research and Advisory group's second quarter report said Monday.

Also impacting supply is Russia's recent ban on pork following the African swine fever outbreak.

"PEDv has been the driving force pushing up pork prices, especially in the U.S., to record highs," Rabobank analyst Albert Vernooij said in a released statement. "U.S. futures climbed 30% in Q1 and are up 45% over last year, impacting pork users and consumer's ability to source enough pork for their needs."

PEDV, African swine fever impact pork supplies, pushing up prices, Rabobank says (Photo by Jennifer Campbell)
PEDV, African swine fever impact pork supplies, pushing up prices, Rabobank says (Photo by Jennifer Campbell)

PEDV-caused supply decline, currently impacting the U.S., Japan, South Korea and Mexico, is contrary to a previous estimate that global pork production would increase 1.3%.

Related: Have Market Participants Correctly Gauged PEDV Magnitude?

In the U.S., where the PEDV outbreak has been most severe, Rabobank estimates that pork production could decline to as much as 6-7% in 2014 due to hog losses from the virus.

The impact of PEDV in Japan and South Korea is sizable, but difficult to estimate as the spread of the disease is not known, Rabobank said.

African swine fever
In Russia, prices have spiked since its ban on EU pork imports, following the discovery of ASF in wild boars in Poland and Lithuania. According to Rabobank, the ban translates to a loss of 1.3 million tonnes of pork imports – about one third of Russia's total import volume in 2013. This has resulted in short supply and higher prices in Russia, but with North America expected to feel the impact of PEDV for the remainder of 2014, Russia will have few alternatives to fill the void left by the EU.

Meanwhile, a glut of liquidated sows in China – the world's largest producer and consumer of pork – is easing stress on global supplies.

Related: USDA to Require PEDV, Swine Delta Coronavirus Reporting

Rabobank believes that Chinese pork prices will continue to fall in Q2 and into Q3 2014, more than a year after the price decline began. As mentioned, sow liquidation, which commenced in April, will drive prices lower this summer as supply and demand rebalance.

Looking to the back half of the year, the continued sow liquidation should help Chinese pork prices recover by the end of Q3 2014 in line with the seasonal increase of China's pork consumption.

"In China, pork consumption is expected to remain steady in 2014, as hog supply will continue to be at a relatively sufficient level," Vernooij concluded.

News source: Rabobank