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New PEDv license step forward, but it’s a drag on futures prices

 

Hog Outlook 

Zoetis announced last week they have a conditional license from USDA for a new PEDv vaccine. Sales of the vaccine are expected to begin later this month. The vaccine is administered in two doses to pregnant sows and gilts to boost antibodies in the colostrums and hopefully prevent piglet death from PEDv.

As should be expected, the news was a drag on deferred hog futures prices. The effectiveness of the vaccine is questionable, especially in sows that have not had PED. But, this is another step forward in the effort to control this devastating disease. Harrisvaccines received a conditional license for their PEDv vaccine in June.

A rare event is occurring: Ham prices are currently above belly prices. On the Sept. 5 morning report, wholesale hams were worth $101.83/cwt. and bellies were worth 100.86/cwt. This is BLT season when bellies are usually close to their yearly high. This year, the peak in bellies prices was $203.53/cwt. on April 7. At that time, there was fear that the PEDv would create a pork shortage and we would run out of bacon this summer. A lot of bellies were put in cold storage this spring and that became a drag on belly prices this summer.

Last week’s hog slaughter totaled 1.78 million head, down 10.1 percent from the week before because of the Labor Day holiday, and down 10.2 percent from the same week last year. Hog slaughter has been down more than 7.0 percent for eight of the last 10 weeks.

The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 280.6 pounds, down 1.5 pounds from the week before, but 10.4 pounds heavier than the same week last year. This was the 16th consecutive week with weights at least 10 pounds heavier than a year ago.

After seven weeks of price decline, the national average negotiated carcass price for direct delivered hogs on the morning report Sept. 5, $95.22/cwt., is up $4.66 from the previous week and up $8.62 compared to a year ago. The Eastern Corn Belt average price Sept. 5 was $92.44/cwt. The Western Corn Belt averaged $98.06/cwt., and Iowa-Minnesota’s morning average hog price was $98.09/cwt. Peoria had a top live price Sept. 5 of $64/cwt. Interior Missouri live hogs had a top price of $64.50/cwt., down $1.50 compared to the previous Friday.

The pork cutout value was also higher last week. The Sept. 6 morning cutout was $102.82/cwt. FOB the plants, up $1.20 from the previous Friday and up $7.88 above a year ago. The morning hog carcass price Sept. 5 was 92.6 percent of the cutout value.

Hog futures were higher last week. The October hog futures contract ended the week at $105.62/cwt., up $7.50 from the previous Friday. December hogs gained $3.45 last week to close at $95.45/cwt. The February lean hog contract settled at $91.42/cwt., a gain of 60 cents. The big gain by the October contract plus its large premium over the cash market makes us optimistic about cash hog prices gaining more this week.

 

The views and opinions expressed in this column are those of the authors and not necessarily those of Farm World. Readers with questions or comments for Ron Plain and Scott Brown may write to them in care of this publication.

9/10/2014