PEDv often fatal The incurable disease may result in fewer slaughter-ready hogs when demand peaks in spring, sending prices even higher
CHICAGO, Ill. (Reuters) — Hillshire Brands Co. says the number of cases of a virus deadly to baby piglets is growing, and it is increasing meat prices to combat rising commodity costs tied to the disease.
The manufacturer of Jimmy Dean sausages and Ball Park hot dogs was one of the first companies to state publicly that the porcine epidemic diarrhea virus (PEDv) was hurting its bottom line.
Hillshire’s net sales increased one percent to $984 million, but operating income declined by 35 percent, pressuring margins.
“As we’ve moved into the second quarter, we’ve begun to take additional pricing actions,” Hillshire president Sean Connolly said.
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Sales volumes could decline as consumers adapt to higher prices at the grocery store, he added.
Analysts will be watching for signs of PEDv when other major meat companies report earnings later this month.
Archer Daniels Midland Co. recently said the disease had not had a significant impact on demand for soy meal, a widely used feed in hog diets.
Hillshire’s fiscal quarter that ended Sept. 28 would be the first to take into account the PEDv disease, which was discovered in the U.S. hog herd in May and thought to affect hundreds of thousands of the 68 million hog herd. It typically takes hogs about six months to reach slaughter weights.
The incurable disease causes diarrhea, vomiting and dehydration in hogs, killing as many as 80 percent of piglets that contract it. The disease not does affect humans and is not a food safety concern.
Maria Henry, Hillshire’s chief financial officer, said in a conference call with analysts that the number of instances of PEDv was increasing, driving up prices for hogs.
“We are heavily affected with what’s going on there,” she said. “We had a spike early, and then the number of reported cases was coming down. Now the number of reported cases is going back up. That’s wreaked a bit of havoc on that piece of the market, particularly around pork and sows.”
Benchmark lean hog futures shot to nearly two-year highs at the Chicago Mercantile Exchange after the outbreak.
Prices for live sows are up 27 percent from a year ago, while wholesale prices for hams hit $89.30 per hundredweight Nov. 1, just below the record high levels seen in 2008, according to U.S. Department of Agriculture data.
Pork prices typically decline early in the autumn as the arrival of mild temperatures and freshly harvested corn and soybeans speed weight gain in the animals, creating more supply.
The worst may be yet to come. Animals contracting the disease in the autumn may not be available in the spring when demand hits its yearly peak before summer grilling season.
“We will see the most significant impact in the spring,” said Dan Norcini, an independent livestock trader.
“You are going to see a reduction in the number of slaughter-ready hogs in the time frame pork demand begins to increase.”
