US retail pork prices expected to rise as high as 15% this summer as supplies slashed by new swine virus
DES MOINES, Iowa
March 16, 2014
– Prices for ribs, chops, hams and other pork products in the grocery store are expected to climb as much as 15 percent this summer as supplies are slashed by a new swine virus that's sweeping the country.
That's tough news for consumers, also facing rapidly rising prices for beef. The disease hits just as pork producers are recovering from high corn prices.
The situation is critical for Iowa, the nation's largest producer of pigs. Iowa producers generate about $7 billion in sales and employ about 39,000 workers caring for the state's 20.5 million animals.
So far, producers in 26 states have reported infected herds with the highly contagious porcine epidemic diarrhea virus, known as PEDv. The virus is fatal to piglets. In less than a year, losses are estimated at 5 million.
"It's going to have a profound impact on supplies this summer," said Steve Meyer, an analyst at Paragon Economics in Adel. "Prices are going to get significantly higher."
The virus poses no threat to other animals or humans. And pork products remain safe for consumers, officials say.
Consumers were already facing record high prices for beef. Overall, beef prices are expected to climb 7 percent in 2014, pushed mostly by increasing costs for ground beef. Lean ground beef could spike up to 20 percent this year, said Lance Zimmerman, an analyst at Cattlefax, outside Denver.
Beef supplies also have been shrinking, primarily because of drought that has punished large cattle-producing states from Texas up to the Dakotas, Zimmerman said. "We have rapidly and methodically been culling cows out of the drought area since 2010," he said.
Meyer expects pork supplies to shrink 10 percent, driving wholesale pork prices up 25 percent this summer.
How a producer fares financially depends on how hard the herd was hit. "Some producers are worse off than others," Meyer said. "On average, we think the market impact on prices will offset the quantity reductions and probably increase total revenue for the industry."
Right now, reduced pork supplies are being offset by larger hogs headed to market, said Lee Schultz, an agricultural economist at Iowa State University. "There's a lot uncertainty about what those supplies will be this summer," he said.
Meyer anticipates shrinking pork supplies eventually will affect processing plants, given the spread of the disease. Already, meat processing plants in Oklahoma and North Carolina have scaled back production because of tight supplies.
Companies with big pork operations in Iowa are saying little.
Arkansas-based Tyson Foods said it's not seeing PEDv-related supply reductions so far, but it is seeing tightening supplies. "When our operations do see a reduction in supply, we'll adjust our production as needed," said Dan Fogleman, a Tyson spokesman.
Minnesota-based Cargill Inc. said it's not immune to reduced supplies caused by PEDv, but declined to project how the company could be affected.
Meyer said: "I would say come May, our plants in the upper Midwest are going to have problems with supplies. I think we're going to have workers taking a day a week off. We're going to see some idling of plant capacity."
Warmer temperatures could help reduce the spread of the disease, Meyer said. PEDv is spread by manure, and just a speck can infect a pig.
The virus can live longer in the cold, which also makes it difficult to disinfect pens, trucks and other equipment.
Craig Rowles, an Iowa producer and veterinarian, has lost 13,000 piglets despite dedicated efforts to keep the disease out.
He said workers are sometimes cleaning with toothbrushes in an attempt to eliminate the disease from the operation.
Rowles believes it will be difficult for the industry to escape the losses from the disease, which has also spread to Canada. The U.S. strains are nearly identical to those infecting herds in China in 2010, making the country the likely source, say scientists at the American Society for Microbiology.
An Ames, Iowa, company provides the nation's only vaccine for the virus. D.L. "Hank" Harris, CEO of Harrisvaccines, said his company has shipped 1.4 million doses of vaccine to producers.
Meyer believes producers are getting better at managing the disease, and supplies could begin rebounding in the third or fourth quarter.
That could mean some price relief for consumers like Luke Spencer. He and his family own the Twisted Tail, a bar and restaurant in Beebeetown, a tiny burg in western Iowa. Spencer goes through about 300 pounds of ribs each week. "It's not our big moneymaker, but it makes people happy," Spencer said.
In the past month, Spencer said rib prices have spiked 8 percent, but he has no immediate plan to consider adjusting prices. An increase "upsets people pretty fast," he said.
Iowa State economist Schultz said many retailers and restaurant owners feel the same, worried that an increase could hurt demand. "Retail prices are relatively sticky. We don't see large swings in retail price, because they don't want customers feeling that sticker shock," he said.
Rowles believes the high prices could be around well into next year, given that pigs in less than half of the pork operations in the country have been exposed to the disease. "That means there are 60 to 70 percent of sow herds that have not been exposed," he said. "Every week, we look at the reports, more sows, more farms are testing positive."
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