​Pig Profits

The outbreak of Porcine Epidemic Diarrhea Virus at pig farms across the U.S. has been worse than expected. PEDv, which was first diagnosed a year ago and has since killed millions of pigs in more than two dozen states, reduced the U.S. pig crop by 6 percent in the first quarter and will likely result in total 2014 production falling by an estimated 4 to 5 percent, according to Credit Suisse.

How has that scarcity played out in industry? For starters, pork customers stocked up on inventory when the virus emerged. That drove up prices for processed meats and even temporarily boosted margins for pork packers such as Tyson and Hormel.

But none of the large packaged food companies rely too heavily on pork for the run-up to have a dramatic effect on profits—at Kraft, for example, refrigerated meats only represent 10 percent of company profits. While the impact has been disastrous for some farms, the virus usually only impacts one litter per sow as pigs tend to develop immunity in only three weeks.

As a result, most sow barns have returned to normal productivity once the virus has run its course.

First published in 2014 in The Financialist.