Hysteria is the best word I can think of for what happened to hog prices this week when consumers around the world mistakenly associated pork production with the Type A-H1N1 virus. This morning there was a report from Los Angles of a hospital having to set up a triage system because of so many people coming to the emergency room fearing they had contracted flu.
As of this morning, there were less than 200 confirmed US cases (only 1 in Minnesota and 2 in Iowa) and the only US death was a small child who had other health issues. Thanks to Aaron Putze, Executive Director for the Coalition to Support Iowa’s Farmers (www.supportfarmers.com) for the following information which was in his recent newsletter:
The following numbers, courtesy of the Centers for Disease Control, provide context to the current H1N1 flu strain. According to the CDC, annual deaths in the United States from various causes include:
1) Heart disease: 696,947
2) Cancer: 557,271
3) Stroke: 162,672
4) Respiratory disease: 124,816
5) Accidents: 106,742
6) Diabetes: 73,249
7) Flu/Pneumonia: 65,681
9) Suicide: 32,000
10) Homicide: 15,495
Number 7 on this listing is flu. Note that it isn’t specific to Type A-H1N1, but instead is all flu. People die every year from the flu virus and its associated complications. That is why there is such a massive effort each fall in the US by health professionals to have populations at risk vaccinated. With only 1 confirmed US death, less than 200 confirmed cases so far, and apparent stability happening in the Mexican population, the hysteria and panic surrounding the current flu needs to be put into perspective.
The financial damage to the US swine industry in the past 5 days has been massive. It’s really tough to find any producer optimistic about the chances for any type of summer rally in prices. I suspect this weeks damage to the Chicago futures will first show up in spot market prices for weaned and feeder pigs. Instead of a gradual decline in prices, typical for this time of year, I expect to see a sharp drop in value for these pigs in the next few weeks. If I had to guess, the drop may be as much as $10-15 per head. This will translate in prices that are below variable costs of production for farrowing sites.
As I’ve stated before, this pressure means that the most vulnerable production model in these economic times is systems which have 2 profit centers – sale of weaned pigs and sale of market pigs. I would expect those selling weaned pigs to be faced with some very tough decisions in the next few weeks regarding their ability to remain in pork production.