It could take weeks — or longer — before U.S. pork producers recover from export restrictions tied to a worldwide influenza outbreak, says Chris Hurt, Purdue University agricultural economist.
With China, Russia and Ukraine and other countries refusing to accept pork from U.S. states or 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, Hurt notes. That means lower prices for a pork industry already reeling in a tough economic climate.
"This couldn't get much worse for the pork industry," Hurt relays. "You've got other countries starting to follow Russia's and China's by limiting imports of our pork. Then there are consumers worldwide who are linking the word 'swine' to pork, even though this influenza strain did not come from swine." Add to that the challenges facing 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. However, only 20 of the deaths in Mexico have so far been confirmed to be associated with this new flu. Although called "swine" flu, the virus is a new sub-variant combining parts of bird, human and pig influenza viruses. As of today, nearly 90 people in seven states have been infected with the virus.
Although the new H1N1 strain has not been reported in pigs anywhere, and properly handled and cooked pork is safe to eat, the pork industry is feeling the brunt of public misunderstanding about the virus.
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 or 27.4 percent of the nearly 5 billion pounds of pork exported from the United States in 2008. "Any loss of those sales to those important markets will lower pork prices," Hurt says. "The 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 the market's anticipation of what this flu event means over the next few months. 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."
H1N1 fallout is just the latest setback for pork producers. "The pork industry has been losing money since fall 2007," Hurt notes. "Producers are near break-even right now. We had hoped that producers would return to profitability by May, but that's not likely to happen now."
The flu outbreak is the third major shock to the pork industry in the past 18 months. Pork producers were beset by sharply rising feed prices in late 2007 and 2008 and the global financial crisis this past fall.
"The pork industry uses 28 percent of the grains fed to livestock and 23 percent of the protein meals fed to livestock," Hurt adds. "If this flu event causes pork demand to drop, that means less corn and soybean meal use, with downward impacts on those prices, as well."
As bad as the current flu situation is for the pork industry, Hurt doubts that pork producers 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 2005-2006.
"Both beef and poultry exports were negatively impacted," Hurt notes. "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," he concludes.
Source: Purdue University