Bird flu flies to Indiana

As packers are attempting to take action with kills this week, we may see some pushback to higher prices in the coming days.

Typically this does not mean an actual top, just some short term pushback. Seasonally cash hogs fall between May 20 and June 2 before rebounding to the year’s highs on June 23. Allendale’s $84 upside target for June futures was filled last week. We are now neutral to hogs as they are at value.

Officials have confirmed the first bird flu finding for the state of Indiana. This was found at an individual’s personal poultry flock, not a commercial operation. This one was the H5N8 strain that was previously found on the West Coast. All of the previous Midwest findings were of the H5N2 variant.

We had an Indiana based customer suggest this would be a problem as Indiana was said to be the #1 duck producer in the United States. We cannot confirm this claim, as duck production is so small, that USDA does not provide a state by state breakdown. Even if true we would likely discount this information due to the size of duck production. In 2014 the nation produced 38.5 billion lbs. of young chicken, 7.2 billion of turkey, and only 0.1 billion of duck.

Where this Indiana story may hold some of the trade’s attention is with table eggs. The poultry industry puts egg producers in two distinct classes, table eggs and hatching eggs. Table egg producers have hens that produce eggs for the consumer market (exactly as it sounds). Hatching egg producers send their fertilized eggs to chicken houses to be raises as birds. Indiana is the nation’s #2 table egg producer. They were responsible for 9% of last year’s production. Of interest Iowa, which has multiple findings of bird flu, is the #1 producer (19%).

Being very clear this does not mean that the nation’s egg production will fall either 9% or even 19% this year. No Indiana egg producers have it. In fact, all we would be doing is limiting the growth in egg production this year. This story means exactly nothing for the meat market. Bird flu is in the Midwest and it will continue to expand in the next 10 days with our cool temperature forecast. New findings will fall sharply in the coming weeks once summer heat kicks in then it will restart once fall rolls around. For now, consider bird flu to be bearish to the meat industry. We have no impact on chicken production, located in the South and East, but are restricting exports. Any effect on the turkey industry is more than offset by the bearish situation in chicken.

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About the Author

Rich Nelson is Director of Research at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.