One analyst says it's time to reduce breeding herd
By CAROL RYAN DUMAS
Now that the dust has settled on the H1N1 issue that arose in late April, and China has announced it will lift its ban on U.S. pork, the industry can look back on the harm the issues caused to already struggling pork producers.
Since September 2007, the U.S. pork industry has lost $5.4 billion. Producers have lost an average of about $23 per pig over the past two years, and as much as $40 to $50 a head at times, according to National Pork Producers Council.
Producers' plight had improved from losses of $20 a head this spring to $11 a head, but immediately returned to the $20 loss range after the human outbreak of H1N1, mislabeled swine flu, in Mexico.
The $9 swing was largely attributed to the mislabeling of H1N1, said Dave Warner, vice president of communications for National Pork.
U.S pork saw its entry into several countries denied. Exports to China -- U.S. pork's third-largest customer -- valued at $690 million in 2008, took the biggest hit. January through August U.S. pork exports to China this year were down by 50 percent over the same period last year, he said.
"Losses may have recovered since H1N1, but they (producers) are still losing money," Warner said.
Exports in 2008 were phenomenal, up 55 percent from 2007, and marked the industry's 17th consecutive year of increases, he said. They had been up a little overall this year through April, but exports to two important markets, China and Russia, were down 39 percent and 56 percent, respectively.
"If we hadn't had the H1N1 issue, exports would have been down but still greater than 2007," Warner said.
But H1N1 should never have been an issue, he said.
"It's not a food-borne virus, it's airborne. Our trading partners know that," he said.
Nonetheless, the loss in exports will further hurt the industry; NPPC calculates the value of exports as $48 of the industry's per head price. And although small shipments continued to Hong Kong this summer, there's no indication as to when exports to mainland China will resume.
National Pork tallies actual and projected losses from H1N1 from April to the end of 2009 at nearly $2.2 billion.
While H1N1 exacerbated the devastation in the industry, the picture is bigger than that, said Steve Meyer, livestock analyst and president of Paragon Economics. Troubles began with skyrocketing feed costs, but genetics, improvements and better efficiencies in the industry are also part of the mix.
What needs to happen now is a reduction in the breeding herd, both in the U.S. and in Canada, he said. The main problem has been that both supplies and pigs are large.
"It's time to move on from H1N1," he said. "I think the real impact was last spring and summer."
Nonetheless, futures prices immediately reacted favorably after the announcement that China will lift its ban on U.S. pork, Warner said.
Meyer said the industry was fearful that with students going back to school this fall, an influenza explosion would harm markets.
"But it doesn't seem to have had that much impact on consumers," he said. "I think the markets have held together pretty well. We had a nice rally."
But it might not be enough to help producers, who have suffered two years of losses, have burned through equity and can't get credit, Warner said.
Neither Warner nor Meyer has a feel for how many producers have gone out of business this year.
"Cohaire Farms, a large producer (in North Carolina), just filed for bankruptcy, and we have heard that several others are on the verge of going out of business," Warner said.
But there are no hard numbers, he said.