Is H7N9 supporting the US hog price?

The first three quarters of 2013 looked set to be planned, and probably painful, for US hog farmers. After record prices and record exports in 2011 and 2012 last summer’s hike in feed prices spoilt the prospect of a winter holiday in Florida as hog margins turned negative. But, according to the census data, farmers gritted their teeth, held on to their sows,  and hoped for better weather and a big corn harvest in 2013 in the expectation that improved productivity and the age-old hog price cycle would get them through the winter of 2012/13. If and when feed prices dropped in the autumn of 2013 they expected to get their reward.

But it hasn’t worked out quite like that.

North American hog prices have fallen back in 2013 – and so have Europe’s – but not by as much as might have been expected. And yet US pork exports are down in the first few months of 2013 (as are Canada’s) and there are no signs that the US population is embarking on a feast of BBQ spare ribs.  So why haven’t US hog prices fallen further and faster?

As ever, the recent data that we need in order to check out various answers to this question are not available yet. But one piece of data and market behaviour that no-one expected is clear and that is the arrival of the new Bird Flu strain H7N9 in eastern China. The reports from there about fears of bird-human and human-human spread of the virus are not isolated. And there is no avoiding the fact that some people have died from this strain of flu (24 so far) and that the World Heath Organisation has admitted that this new strain could be lethal to humans. Live poultry markets in China have been closed down, poultrymeat consumption and prices have dropped like a stone, and the poultry population is being culled. The costs to the industry so far are estimated at $1 billion.

Is there a connection with hog prices outside of China?

The short answer is that we don’t know yet. We do know that domestic hog prices are very weak in China and that State purchases of frozen pork have been operating in most major cities since mid-March. On the face of it this could be explained by increased supplies of domestic pork production coming to market. But is there also a connection with the fears about Bird Flu – a rekindling of the Swine Flu scares from a few years ago? It’s important to note that we are dealing with perceptions here – not scientific evidence. And in China’s micro-blog community – including Sina Weibo – the connections between H7N9 and the recent unexplained occurrence of thousands of dead pigs in a Shanghai river is being Tweeted and re-Tweeted. And uncomplimentary remarks about public health officials are commonplace in Chinese micro-blogs.

This is all speculation but I lived through the Mad Cow episodes in the UK and worked on the food scare data to understand its impact on meat demand. I heard senior politicians and officials reassure everyone that everything was fine but the UK population took years to be reassured – and still gets reminders of the fallibility of our food safety procedures e.g. the recent horsemeat scandal. Bird Flu in China is another example of the relatively thin line between consumers’ faith in the system and panic in the supermarket aisles. We should not be surprised if it turns out that there are impacts on pork consumption as well as poultry consumption in China. And that’s where the connection with overseas supplies of pork comes in. For evidence of how any of this might be affecting hog prices outside China we will have to wait until we see the latest pork import data.  This will provide another piece of the jigsaw and might shed some light on this speculation.

This Bird Flu story is covered in the latest issue of Whole Hog Brief (April). Other stories include;

an interview and feature on the UK genetics company, ACMC;

the way that English pig farmers could be gambling on herd cutbacks in the rest of the EU;

the USDA’s theories on how the US pork industry has consistently produced more pork from less pigs in the last 5 years;

and our regular comparison of global pig prices.

There’s a lot going in the global pig industry at the moment…..

Dr John Strak, Editor Whole Hog