We hope by the time you read this that much of the collective assortment of random shocks simultaneously faced by the U.S. pork industry are in the past, and everyone is breathing a collective sigh of relief, even without being completely out of the woods.
In relative terms, producers are dealing with a large (intended to be) permanent increase in national production, coupled with continually rising productivity and countered with temporarily reduced slaughter capacity due to catastrophic weather on the East Coast. Add to these factors the tariff realities and concerns affecting export sales plus the whispered worries about the potential for a first U.S. case of African Swine Fever (ASF). All these issues are conspiring to make producers wonder what else could go wrong.
To top it off, this real basket of deplorables was set down in producers’ midst as they stare directly into the coming fourth quarter seasonal compounding.
The situation tests the economic resilience of both individual pork producers and the U.S. pork business/related infrastructure in a potentially generational way. This could be the year (and early next) millennials in the business think about in a decade or two as they look back, the way old hats think about 1996 and 1998.
Surprising export strength
There are several things afoot, however, that could turn the situation around substantially and quickly. We already see some evidence the export market is both holding up better than expected and is even edging back. Coupled with that, the belly primal seems to have put in its low for now and has buoyed the carcass price out of the recent shocking lows with some upside glimmer.
All of that is fragile at this writing. The ASF outbreaks in both China and the European Union (EU) are a wild card now, with respect to the eventual purchasing patterns and export opportunities (for all the major players, including the U.S.) that will emerge.
I can recall traveling in Europe where every border crossing required stopping, showing papers/passport and potentially filling out a form or two. Big tollbooth-like structures stretched across major roadways to protect border security. Those restrictions are largely gone now with the Schengen agreement established in 1995 for the large majority of EU and EU-area nations. The agreement essentially ended internal borders between countries for people movement and focused on regulating a single external border around all signatories, like travel in the U.S.
Europe’s ASF susceptibility
With the discovery of the virus in a couple of wild boars in Belgium, there is no longer a buffer between western Europe and the central/eastern European outbreaks of ASF. Key concentrated production areas in the Normandy area of France are now vulnerable, as well as dense production areas farther to the north and south.
Even though Greece (a Schengen signatory) is separated from much of the pig production in the EU by the Adriatic Sea, ferry travel from Greece to Italy (especially) is commonplace and ferry travel from there to the Iberian Peninsula and many other areas of the Mediterranean is commonplace.
Wild boar infection with ASF has reportedly increased dramatically in central and eastern Europe. Hunting and human migration could potentially push feral swine into new uninfected areas.
Because ASF has never occurred in the U.S., there is limited experiential knowledge about the virus’s spread. Feeding uncooked garbage and direct contact with infected feral swine, ticks and potentially infected parts of dead animals are fortunately relatively rare in the U.S., but there is some limited evidence ASF can enter in the traditional routes that are usually targeted by biosecurity measures (manure on boots, even pork for human consumption) when biosecurity or border control is lax.
Never underestimate the savvy of viruses and other micro-organisms to defy conventional wisdom and crop up in places in which they were never supposed to gain access. Lots of good educational material has emerged in the past several weeks for industry folks who travel abroad. If you are planning a trip abroad, please take the time to get educated and cooperate with customs and border control. Let’s hope we have seen the low for the year, even if profits are many months away.
Dennis DiPietre and Lance Mulberry are economists with KnowledgeVentures, LLC. They consult with producers, processors, pharmaceutical companies, genetics firms, nutrition experts and technology providers, throughout the global pork chain. The focus of their consultation is driving client innovation and optimization in precision agricultural processes through bio-economic modeling. Call (573) 875-7890 or email: [email protected]