PEDv drives a hog price rollercoaster – have we been here before?

US hog prices

The chart shown alongside shows how US hog prices have risen – and fallen – in response to the spread of PEDv.  From late February onwards a mixture of fear and greed, mainly driven by market rumour, has driven hog prices up and up. Prices have moved up to be about 60-70% higher than at the same time last year and commentators are full of talk about “record highs”. Price shocks like this don’t happen often in national or global markets and 2014 looks likely to go down as a record year for pig prices and hog farmers’ margins. This reminds me of 1996/97 – when foot and mouth decimated the Taiwanese hog herd and took all that country’s exports out of the global export supply – and classical swine fever did something similar to the Dutch pig herd and export supply. It also reminds me of what happened in 1998/9 after the “record highs” of 1996/97.

PEDv has not just affected US hogs – the disease is now being found in Mexico, Canada, the Philippines and Japan. So the price effect is global and farmers who do not have the disease on their units (and even those with it) are seeing higher prices and margins for their pigs in 2014.

Back to the future – the 1996/97price boom induced a supply response in pig producing countries that did not have foot and mouth or swine fever to expand their supplies of pork (and even those that did, like the Netherlands recovered and expanded much more rapidly than was expected). That’s why 1998/1999 was set up for the mother of all price slumps. Hog prices reached lows that had not been seen in a generation. This is not a prediction of what will happen to hog prices in late 2014 and 2015 – just a reminder that what goes up usually comes down again….