Disease driving red hot hog market

Orlan Love
Published: March 26 2014 | 4:08 am - Updated: 1 April 2014 | 10:10 am in

Hogs have never smelled more like money than they do this year.

Uncertainty surrounding losses to porcine epidemic diarrhea virus has sent lean hog futures for spring and summer contracts to record-high levels.

“This is our equivalent of $8 a bushel corn,” said Al Wulfekuhle, a Buchanan County pork producer and an Iowa Pork Producers Association director, referring to the profits realized by grain farmers when the 2012 drought pushed corn and soybean prices to record levels.

Wulfekuhle noted, however, that farmers who have lost large numbers of piglets to the virus and those who have pre-sold their hogs at much lower contract prices are not fully participating in pork’s newfound prosperity.

Wulfekuhle, who started raising pigs in 1979, said 2014 “is probably my best year overall,” even though one of his three sow farms has been infected with the virus.

“It’s a wacky business. You can make a lot of money in a hurry, and you can lose a lot in a hurry,” he said.

With low feed prices and high hog prices, “we are seeing very, very strong historical profits in the hog industry right now,” said Lee Schulz, an Iowa State University agricultural economist.

Lou Arens, a commodities broker with PCI Advisory Services in Waucoma, said the current hog market is unprecedented.

PED, a virus that kills a high percentage of infected little pigs, has wiped out so much supply that the high prices could last until fall, he said.

Since being detected in the United States in May 2013, PED has been confirmed on more than 4,700 farms in 27 states, according to USDA's National Animal Health Laboratory Network.

Analysts said the lack of sow herd expansion and drought-shrunken beef supplies, all compounded by at least 4 million pigs dying of PED, have created opportunities for profits of $100 per head this summer.

Lean pork futures prices for April, June, July and August are all around $125 per hundredweight. Until February, no hog futures contract had ever closed above $108 per hundredweight.

The national weighted average cash price for live hogs delivered Friday was about $97 per hundredweight.

A semi load of hogs that brought $8,000 when the market was at its lowest in the late 1990s now brings $40,000, said Ken Cook, who raises about 27,000 hogs a year with his brother Al and his son Aaron in southeast Buchanan County.

Cook said his son’s farrowing operation has so far remained free of the PED virus.

To put the surge in perspective, Cook said the hogs they delivered in January and February sold for an average price of $63 per hundredweight, which compares with $93 per hundredweight for hogs sold last week.

“It’s not like we won the lottery and can go out and buy a lot of stuff,” Cook said.

This year’s profits will help the family business get through the leaner times that preceded the boom and will surely come again, he said.

The market should remain strong through the summer and into the fall, said ISU’s Schulz. “By then producers should be getting a handle on PED and building stocks,” Schulz said.

Analysts also said consumers will pay considerably more for pork this year.

“You will be surprised at the meat counter this summer – and not pleasantly,” said Arens, the Waucoma-based commodities broker.

Rising retail prices eventually will lower pork demand, which will stabilize the market. But that probably won't happen until the last quarter of this year, Arens said.

Schulz said retail pork prices had increased 6.8 percent in the year ending last month.

Even though retail pork prices increased 5.1 percent in 2013, consumption increased because of beef prices at historically high levels, Schulz said.

The good times don’t feel so good to Todd Wiley, who lost about 1,100 baby pigs when the virus struck one of his sow farms on Jan. 31.

“We knew it was around and had taken extra biosecurity precautions – showering in and out of our facilities. We did not have any pigs coming in from the outside, but we still got it,” said Wiley, whose farrow-to-finish operation in Linn, Buchanan, Benton and Black Hawk counties produces about 28,000 hogs per year.

To limit the spread of the disease, Wiley said he knew he had to infect his sows and gilts so they could build antibodies to develop resistance.

He and his employees sponged up feces from the infected pigs and added it to his breeding stock’s drinking water.

“We lost two weeks’ production, but we are moving past it now,” Wiley said

Today’s high value hogs contrast dramatically with the practically worthless pigs raised at the close of the last century. In late 1988 and early 1999, a surfeit of hogs drove prices down to around $10 per hundredweight, and producers were losing more than $50 on every hog they raised.

To cut their losses, some farmers euthanized little pigs, and farmers in southwest Iowa staged a hog hunt to call attention to the lowest pork prices since the Great Depression.

Of the past eight years, many of them characterized by historically high corn and soybean prices, the principal inputs for pork production, about half have been profitable, Wiley said.

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