H1N1: Aftermath for the Ag Industry

As H1N1 media attention slowly dissipates, hog farmers are surveying the damage. At the time of this blog posting, 13,398 cases in 48 countries have been confirmed with 95 deaths. Repercussions of the outbreak have resulted in a blemished pork industry and have consequently impacted other agricultural commodities.

Despite the fact that humans cannot contract the H1N1 virus from eating pork, the media blitz has further damaged the already stressed pork industry. Since 2007, pork producers have struggled to earn profits. According to the USDA Agricultural Marketing Service, hog farmers have lost money 17 of the past 19 months; roughly 50 percent of the profits they have accumulated since January 1990. Producers were anxiously awaiting the onset of grilling season to fuel increased pork sales, but the virus outbreak terminated any such hope.

“The impact of the H1N1 flu has been quite severe on spot hog prices,” or the day-to-day cost of pigs, said National Pork Producers Council CEO, Neil Dierks, “Producers loses have nearly doubled.”

Dwindling domestic demands, coupled with bans on pork imports, have significantly affected the health and vivacity of the pork industry nationally and internationally.

According to the USDA Agricultural Marketing Service:
• The average American producer will lose $13.26 per head for the remainder of 2009, which is an average loss of $27.7 million per week for the U.S. swine industry.
• The U.S. pork industry is losing $8.4 million each day.
• Mexican pork sales have fallen 80 percent at a loss of $188 million.

H1N1 did not spare other agricultural markets. Russia banned all meat imports from producers in affected states and countries as animal-feed growers witnessed decreased market value as well.

"In the first trading session following the announcement of incidences of swine flu in Mexico and the United States, corn, soybean and wheat futures declined sharply," said Darrel Good, University of Illinois Extension marketing specialist. “Market participants reportedly are concerned that the threat of swine flu will reduce pork demand, stimulating further liquidation of hog numbers and resulting in reduced feed demand.”

Crop prices decreased immediately after the outbreak, but have since rebounded and, in some cases, even surpassed average levels as worries begin to wane. However, the same cannot be said for pork prices.

An industry that generates $34.5 billion of gross national product to the U.S. economy is in jeopardy. American and Mexican industry leaders are working on pork-consumption campaigns to boost sales. The Mexican Confederation of Pork Farmers and Mexico’s agriculture secretary hosted a “pork party” May 14, during which officials publicly promoted pork consumption by eating pork rinds and pork tacos.

Animal and crop farmers worldwide should view the pork fallout as testament to the significance of risk management in an unpredictable industry. The USDA’s Risk Management Agency provides an overview of crop and livestock insurance policies and programs to educate and guide producers.

Has your personal consumption of pork changed? Have you witnessed others bypassing pork products? Can the fate of the pork industry be reversed, or will H1N1 effects permanently tarnish market profitability?