While pork producers have faced more than 18 months of losses, before Type A H1N1 influenza surfaced and became labeled "swine flu", thereby making financial matters worse, it appears some price recovery is beginning.
Most notable, and the futures contract most impacted by the H1N1 outbreak, the CME May lean-hog futures turned upward this week for consecutive days. That May contract cost producers about $27 per hog, and hog prices in general took nearly a 20 percent hit as inaccuracies and mis-perceptions about the pork industry and Type A H1N1 drove the news cycle.
Some export markets, most notably Russia and China, quickly closed their doors to U.S. pork, dropping export demand by 10 percent. Russia has re-opened channels on pork from some U.S. states. In the domestic market, retail meat buyers waited to see how the developments unfolded and whether U.S. consumers would step away from pork at the meatcase.
According to USDA, pork packers sold 9.552 million pounds of pork, the most in a single day since January 2002. Certainly meat buyers recognized a bargain and the growing recognition of pork's safety in the face of the flu epidemic. Wholesale pork prices gained 4.2 percent in two days.
An easily overlooked aspect to the pork demand scenario is how demand developments in Mexico will unfold. Mexico has moved to the No. 2 pork market for U.S. pork and word is that Mexican consumers are not buying pork. Some reports peg the sales decline at 80 percent since the Type A H1N1 outbreak there.
Some analysts have extended their loss projections for the pork industry into May 2010. However, near term, the calming fears over the new H1N1 flu and it's confirmed non-association with pork, the seasonal decline in pork production that's now beginning and somewhat empty supplies in the retailers' pork pipeline all suggest better days ahead for hog prices.