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Pig (prices) fly, but maybe not for much longer


These days, Larry Sailer doesn't like to let people get too close to his pigs.

"We really don't have any veterinarians, or anybody, come onto the site," said Sailer, standing near his pigs. Sailer runs a hog operation in Iowa, and like many of his neighbors, he's dealing with a disease killing young pigs. "We really haven't figured out why it spreads yet."

What's killing the pigs?

The disease is called Porcine Epidemic Diarrhea virus, or PEDv, and over the last year the U.S. Department of Agriculture believes it has wiped out as many as 7 million young pigs—about a 10th of the national swineherd.

"The baby pigs, less than ten days, it causes about 100 percent mortality," Sailer said. (The virus is not a danger to humans.)

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That loss of production is one reason pork prices have skyrocketed. Bacon at the retail level tops $10 a pound in some places. "Right now, the price for a 40-pound pig is over double what it normally is," said David Struthers, another Iowa hog farmer.

But prices may start to come down.

"We're going to see probably lower prices of pork come the fourth quarter, because the virus doesn't like hot weather," Struthers said. Meanwhile, hog farmers are "trying to breed as many sows as possible to bring the production numbers back up."

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Larry Sailer added that prices may also come down as other countries avoid American hogs because of fears the virus will spread overseas.

"We're having a little bit of trouble with Japan right now...and of course we're having a problem with Russia and Ukraine, so our exports might be down a little anyway, so that might offset the lower supply that we have," he said. "It might work out just about right."

Chris Kasson | Bloomberg | Getty Images

Higher pork prices do not appear to be scaring off customers from the other white meat. Smithfield Foods, a major pork producer that's now owned by Chinese food producer Shuanghui International, just reported higher profit margins despite higher costs. Pork may be expensive, but beef costs even more.

The big concern remains the mystery behind PEDv's cause. Farmer Dave Struthers wonders if the virus will kick back up again next spring, creating a new cycle of production disruptions that could become difficult to break until a vaccine is discovered. He's hoping herds are building up an immunity.

Larry Sailer agrees. "PEDv is just like any other disease," he said. "We're going to fight it, find a cure for it, and carry on."

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Even so, no one's taking chances. Hog farmers are avoiding farm shows. Struthers wears one pair of work boots on his farm, and is careful to change footwear before leaving his property, in case he walks over something that contains the highly contagious virus. In fact, he would not let a CNBC camera crew get close to his hogs after discovering they had just visited Larry Sailer's farm.

"This thing is so contagious," said Struthers, "that one of the veterinarians at a state diagnostic clinic said that one pig, theoretically, in one of its stools, could infect the entire nation."

—By CNBC's Jane Wells.