Initial scenarios consider alternative pig mortality rates ranging from an annual pig mortality of 3% to annual mortality of 6%. Market hog morbidity consistent with those rates is also included. Calculated pig mortality for 2013 quarters 2-4 are common across both scenarios. The pig loss of 6% in 2014 quarter 1 matches the observed change in pigs per litter. The lower 2014 quarter 1 pig loss of 3% allows for effects of the unusually severe January to April weather.<br>Market Hog Impacts<br>Figures 1, 2, and 3 capture the effects on market prices, breeding inventory, and slaughter. The changes in prices and slaughter are mirror images of each other. In Figure 1 carcass hog prices increase relative to the baseline while Figure 3 shows hog slaughter falling relative to the baseline. The initial effects are small because few farms are infected. The model determines prices in a quarter based upon hogs coming to market in that quarter and packer demand. It does not allow market participants to include expectations of future anticipated supply disruptions in market price determination. Since market ready hogs are not affected and few pigs are lost in the second and third quarter of 2013, there is little initial price impact. As PEDv spreads hog slaughter contracts more and prices rise sharply. In each scenario prices peak and then trend downward while slaughter falls sharply and then begins to rise. These patterns arise from changes in breeding inventory (Figure 2). The model relies on naïve price expectation where producers expect last quarter’s price to prevail in the future. Increased hog prices increase the incentive to boost breeding inventory and that effect begins to appear in quarter 5 or spring 2014 and becomes larger as hog prices increase. The steady state change is reached in the third quarter of 2016. Increased breeding inventory partially offsets the loss in pigs, so slaughter partially recovers during 2014 before reaching its steady state reduction.
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