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Impact of damaging pig virus has not peaked yet

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The outbreak of porcine epidemic diarrhoea virus on hog slaughter may not have peaked yet, protein giant Tyson Foods warned, implying the annual drop in numbers could top 4m head.

Jim Lochner, the chief operating officer at Tyson Foods, the biggest US meat producer, termed the situation surrounding the outbreak of the virus, PEDv, "very fluid" as data emerges on its spread to 23 US states since its discovery in April, now reaching Canada too.

"It seems like either at least weekly, but sometimes even daily, new evidence comes out," Mr Lochner told investors, after Tyson unveiled forecast-beat results.

Growing toll

The group forecast that in its fiscal year to the end of September, "we expect the PED virus to impact domestic hog supplies by 2-4%," adding that "in our plant locations we will see the effects in the summer months".

The forecast reflected an expectation that the virus "might be influencing" up to 30% of the US sow herd, "with 10% or so impact on the available pigs impacted, so there is where the 3% comes from".

The figure implies a greater downturn than that seen in the US in calendar 2013, when hog slaughter fell by 0.9% to 112.1m head, actually rising last month by 2.8% to 9.74m head, according to the US Department of Agriculture.

However, Mr Lochner flagged efforts by producers to raise hog weights to offset the impact on pork supplies of lower slaughter numbers.

"We probably are likely to see some increase in carcass weight to offset at least some of the pounds lost from the head loss," he said, adding that the group was "staying on top of" the situation "region to region, producer to producer".

Analyst estimates

Separately, a report from Paragon Economics and Steiner Consulting forecast a lower drop in slaughter numbers for now, saying data in a quarterly USDA sector report last month implied that hog slaughter numbers will be "on average, very close to year-ago levels through February before declining slightly in March".

Factoring in higher weights suggests that "pork production will continue to run 1-3% higher than last year for the next few weeks".

Rabobank said that US pork production would end up "flat to up slightly in 2014, well short of the 3%+ growth we would have seen had PEDv not appeared.

"Low feed costs will incentivise producers to increase weights, but this is likely to merely offset the shortfall in hog numbers as a result of PEDv," which has a high mortality rate in piglets, while slowing weight gain in older animals.

In Chicago, lean hog futures for summer delivery have continued to outperform nearby contracts, on ideas of production losses mounting.

Lean hogs for February stood 0.1% lower at 86.25 cents a pound in late deals in Chicago, where the June contract stood up 1.4% at 104.825 cents a pound, having earlier set a contract high of 104.95 cents a pound.


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