Ag economist: Pork industry taking hit from H1N1 Flu Virus

April 29, 2009 07:00 PM
 
 
It could take weeks - or longer - before U.S. pork producers recover from export restrictions tied to a worldwide influenza outbreak, said a Purdue University agricultural economist.
 
With China, Russia and Ukraine refusing to accept pork from U.S. states and other nations increasing their screening of pork imports, hundreds of millions of pounds of pork could wind up in the U.S. retail market at discounted prices, Chris Hurt said. That means lower prices for a pork industry already reeling in a tough economic climate, he said.
 
"This couldn't get much worse for the pork industry," Hurt said. "You've got other countries starting to follow the lead of Russia and China by limiting their import of our pork. Then there are the consumers worldwide who are linking the word 'swine' to pork, even though this influenza strain did not come from swine. And then there's the world economy in general."
 
The H1N1 influenza virus has been blamed for up to 159 deaths in Mexico and one in the United States. Although commonly called "swine" flu, the virus is a new strain combining parts of bird, human and pig influenza viruses. Nearly 70 people in seven states, including Indiana, have been infected with the virus.
 
Although no cases of the new H1N1 strain have been reported in pigs and properly handled and cooked pork is safe to eat, the pork industry is feeling the brunt of public misunderstanding about the virus, Hurt said.
 
"China and Russia represented 27.4 percent of our pork exports in 2008. Any loss of those sales to those important markets will lower pork prices," Hurt said. "May lean hog futures have fallen 8 percent since Friday (April 24), closing at about $63.30 per hundredweight, or more than $5 lower.
 
"This is, in essence, the market anticipation of what this flu event means over the next few months. The concerns are that 'swine' flu could reduce U.S. pork exports, that U.S. consumers could reduce pork consumption and, more broadly, that the flu could cause a slowing of world economic growth, which would reduce demand for food products in general."
 
China and Russia are the second and fourth largest international buyers of U.S. pork, respectively. Together, the two nations imported 1.28 billion pounds of the nearly 5 billion pounds of pork exported from the United States in 2008.
 
American hog farmers produced 23.3 billion pounds of pork this past year.
 
H1N1 fallout is just the latest setback for pork producers, Hurt said.
 
"The pork industry has been losing money since the fall of 2007," he said. "Producers are near break-even right now. We had hoped that producers would return to profitability by May, but that isn't likely to happen now."
 
The flu outbreak is the third major shock to the pork industry in the past 18 months, Hurt said. Hog farmers were beset by sharply rising feed prices in late 2007 and 2008 and the global financial crisis this past fall, he said.
 
"The pork industry uses 28 percent of the grains fed to livestock and 23 percent of the protein meals fed to livestock," Hurt said. "If this flu event causes demand for pork to drop, that means less usage of corn and soybean meal, with downward impacts on those prices, as well."
 
As bad as it is for the pork industry, Hurt doubts that hog farmers will be hit as hard by the H1N1 outbreak as beef producers were by the U.S. mad cow disease cases in late 2003 or the poultry industry by avian influenza in 2005-06.
 
"Both beef and poultry exports were negatively impacted," Hurt said. "In fact, U.S. beef exports have only recovered to about 75 percent of their 2003 levels.
 
"Pork producers should not panic. The immediate reaction of humans and markets to situations like we have now is often more severe in the short term than the long term."
 
Written by Steve Leer of Purdue University.

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