The clearest indication was futures prices that touched on a limit down move briefly on Monday morning before trading the remainder of the day. The nearby April futures actually gained $0.425/cwt. for the day. May Lean Hogs fell by $1.20 and the summer contracts all declined by $2.40 or so but remained in the mid– to upper- $120s. Overnight electronic trading on the Globex platform has every contract at or above its close from yesterday. None of those price changes are commensurate with a truly bearish report and we would have classified one that had inventories 2 per cent or so above the average pre-report estimate as bearish indeed.

We still believe that the cash market may be the real barometer for this situation. That belief is based primarily on the fact that cash markets are the direct interplay of supply and demand and involve parties that are actually selling meat and buying animals. They are in the trenches each day, not sitting at a computer terminal (we once would have said "not in the pits" but, sadly, can’t really say that to any degree anymore).

In spite of that "reality" view, we also suspect, though, that the cash market has over-reacted and moved into a panic buying mode given the potential for short supplies this summer. Hog slaughter has indeed been short, running 5-7 per cent lower than one year ago over the past 4 weeks. But higher weights have left FI pork production lower by a smaller percentage (about 4 per cent) that would normally result in prices10-12 per cent higher than one year earlier.

The increase this year, of course, has been 40, 50, 60 even 70 per cent for some hog prices. The cutout value was more than 60 per cent higher than last year in the past two weeks. We must remember that prices one year ago were depressed by Russia’s withdrawal from the US market and China’s ill-defined ractopamine "certification" plans. Those lower year-ago prices make these percentages larger but they would still be huge even if last year’s prices had been $10 or so per cwt. higher, a level more indicative of a normal seasonal pattern.

While the cash market’s reaction will require some observation over time, yesterday’s changes seemed to largely shrug off the report. The cutout value was up another $1.26 to another record of $132.58, 68 per cent higher than one year ago. Cash hogs were lower but not sharply so with the national negotiated base falling by $1.54/cwt. carcass from Friday’s record-high, averaging $125.74. Those strike us as muted reactions — so far.

We want to revisit yesterday’s brief discussion of the report’s state level data. We don’t usually study these data too much as individual states do not usually impact the hog or pork markets but with the big issue being uncertainty about a disease that spreads within geographic areas, the state data have taken on more meaning since last summer.

The following table shows percentage of one year earlier for the breeding herd, farrowings, pig crop and litter size as well as total PEDv accessions for five key states since last June. The states are listed in the order that PEDv became an issue among their breeding herds. Iowa has had the largest number of cases since the advent of the disease in April 2013 but saw its breeding herds fall victim in large numbers only last fall.

Note the differences in the time patterns for pig crops and PEDv accessions. The only state that shows a logical relationship is North Carolina. Oklahoma shows some impact on its pig crop in Dec -Feb but that is two quarters after the disease wreaked havoc in the Panhandle area last summer. The three Midwestern states basically show no pig crop impact over time. But would their Dec-Feb pig crops have been even larger had PEDv not been present? Perhaps. But we think that is doubtful given the changes in their breeding herds. And only Iowa shows any significant impact on litter size. These data suggest that Minnesota and Illinois have been unscathed and we know from first-hand contact that that is not the case.

We do not mean to bash USDA or its people in our critique here. They are, for us and many of you, friends who face a huge challenge in this situation. They can do very little beyond the quality of the data they receive from producers who voluntarily respond. The situation is rife with danger. And let everyone remember that we have yet to see much actual slaughter data that will objectively demonstrate whether the numbers are correct.

The market, though, is speaking rather loudly that it believes the numbers are high. It isn’t always right but it does represent a lot of people risking a lot of real money. We all know they don’t do that lightly!