Flu affects pork profits: Conditions starting
to improve, despite China’s ban, experts say
By CHASE CASTLE
ccastle@svnmail.com
800-798-4085, ext. 521
Area hog farmers still are feeling the heat from scares tied to the H1N1 virus, even as U.S. lawmakers appeal to international business representatives for help.
The H1N1, or “swine flu” virus, first gave a black eye to the nation’s hog farmers late last month, when lean hog values dropped roughly $25 a pig because of confusion over where the virus came from and how it’s contracted.
The H1N1 influenza virus can be spread from pigs to humans, but it is not transmitted through food such as pork, which is cleaned of bacteria and viruses when properly cooked.
Although analysts suggest a recovery already is under way, the process is being slowed by embargoes from countries such as China and Russia, which have banned some types of American pork, including some produced in Illinois.
U.S. Rep. Bill Foster, D-Geneva, met with representatives from the American Chamber of Commerce in the People’s Republic of China Wednesday to discuss various trade issues, including the pork ban.
“I’m assuming at this point that [the ban] was driven by health concerns and not by economic or competitive ones,” Foster said before the meeting. “I can’t explain the Chinese action and what fraction of it wasn’t driven by a scientific point of view.”
Mark VonHolten runs a hog farm near Lyndon and is president of the Whiteside County Pork Producers Association.
He agreed with Foster, saying that the pork bans appear to be factually groundless. In a sense, that makes the ban harder to fight since the message that pork doesn’t transmit H1N1 to people already has been sent, he said.
“It’s one thing if they’re based in fact and so forth, but it’s hard to hedge against things like this that have no basis in fact,” VonHolten said. “And you’re just blindsided. I guess you just have to face the consequence ... and move on.”
VonHolten said most of his hogs are sold to big companies such as Swift Foods and Tyson Foods, both of which are large pork exporters.
When word about H1N1 first circulated last month, he said, pork values per-100-pounds dropped by about $8 in the cash market and $11 in the futures market.
“So that’s about an extra $20- to $30-a-head loss on top of what we were already losing,” VonHolten said, referring to mediocre sales even before H1N1 spread. “We were already in a negative position, and that just compounded the effect.”
As for international repercussions, VonHolten said some American investors are waiting for that market to “bottom out” before putting money back into lean hog commodities. Investor confidence probably won’t rebound further until embargoes such as those in China are lifted, he said.
Dave Ward is the senior risk manager for Commodity & Ingredient Hedging of Chicago, which negotiates various fees and costs for pork producers across Central and North America.
He said China’s expanded ban on U.S. pork imports has hurt the American market, but not as badly as the consumer market in Mexico, which is usually a world leader in pork consumption.
On the bright side, he said pork demand began to pick up around May 6.
“The cash market has almost completely rebounded from pre-H1N1 levels, almost. Almost. Futures haven’t quite gotten there yet,” Ward said.
“I don’t know if there can be a full recovery. Maybe a 95 percent recovery. There’s always going to be some fallout.”
Ward said that kind of recovery could happen in the next week.
Although sales this month have improved, VonHolten said some of the recovery is part of a regular, yearly cycle.
“Seasonally, this is what we’d expect,” VonHolten said. “It appears that we’re going to go ahead and go up [with sales], but the top has kind of been taken off of it. We’re not going to reach the level that we normally might expect.”
Sales should rise further around Memorial Day, Ward said, thanks to a typical summer push from backyard grill aficionados.
By the numbers
County Farms Hogs
Whiteside 50 116,721
Bureau 51 95,145
Lee 40 46,581
Source: USDA National Agriculture Statistics Service
Why the ban in China?
Dali Yang is a political science professor at the University of Chicago who has authored numerous books and articles about the Chinese economy and international relations.
He said at least part of the Chinese government’s tough reaction to H1N1 is rooted in recent history; Yang said Chinese health officials still are recouping from the Severe Acute Respiratory System, or “SARS” pandemic, which spread throughout southern China in 2003 and killed nearly 800 people, the Washington Times reported.
“They really learned [some] hard, harsh lessons in terms of the dangers of not reacting quickly,” he said, explaining that the transmission of viruses is an even greater concern in China because of its densely populated 1.3 billion citizens.
“In many ways, I do think there is a little bit of an overreaction. Even if the Chinese government hadn’t banned the imports ... the price of pork in China has virtually collapsed,” Yang said, citing an excess in pork stockpiles there, partially due to recently issued subsidies given by the Chinese government to domestic pork producers. “So it wouldn’t make sense for Chinese businesses to import pork anyway.”
“So it’s not exactly targeted at the United States in terms of China being unhappy with this country. It’s simply that because of fearing the lessons learned from the SARS crisis, they really are in crisis-management mode,” Yang said. “So there are several factors contributing to this.”
