As I write this, it has been 364 days since the first U.S. case of Porcine Epidemic Diarrhea Virus (PEDV) was diagnosed at the Iowa State University Veterinary Diagnostic Lab. I believe everyone was concerned about that news.
A new disease always brings a chill of apprehension, but I doubt anyone knew just how concerned they should have been on May 17, 2013. As it turns out, “very concerned” or “scared to death” both may have been appropriate. The truth is, we still don’t know which better describes this menace to baby pigs.
Not the Foreign Animal Disease We Feared
For years, the U.S. pork industry has feared, considered and planned for the introduction of a foreign animal disease, with virtually all of the attention on Foot-and-Mouth Disease, African Swine Fever and Classical Swine Fever. Any of these would immediately close exports markets, destroying demand for roughly 23 percent of U.S. production.
Domestic supplies would increase dramatically, pushing prices down sharply in order to clear the market. That assumes that domestic demand would remain relatively strong in spite of what almost certainly will be a public relations hurdle as news services cover control and eradication efforts.
PEDV though, is not a demand-killing bug. In fact, pork demand has remained strong since PEDV first appeared, with real per capita pork expenditures growing nearly 6 percent in 2013 and over 5 percent in 2014 through March.
There have been virtually no instances in which the safety of pork has been questioned due to PEDV, and consumers and the popular press have remained calm. This is due in large part to fact-based messages regarding food safety being shared by the pork industry.
The irony of PEDV is that as a supply-impacting disease, producers could be financially better off this year for the following reasons:
1) Demand for pigs is inelastic. This means that any reduction in the pig supply will cause a price increase that is larger in percentage terms than the supply reduction. Further, the relative price change (i.e., price flexibility or multiplier) normally ranges from -2 to -3. So, for every 1 percent reduction in quantity supplied, prices will usually rise 2 to 3 percent.
Since total revenue is price times quantity, a 1 percent decrease in pig output causes a 1 to 2 percent increase in total revenue for producers.
2) Some producers are not losing a large percentage of yearly output to PEDV. Current evidence indicates that most herds return to normal production within five to eight weeks, with most losses in the first three to four weeks. So, 8 to 12 percent of output is being lost on infected farms. Larger producers with multiple sow farms may avoid having PEDV at every location.