May 18, 2009

US pork producers were hoping for a return to profitability this year but, when people started dying in Mexico from the unfortunately named "swine flu," enough consumers backed away from pork to dash the industry's hope for a recovery, said the president of a US-based pork group.

 

"Producers were losing money to begin with and then they lost even more money due to this thing," National Pork Producers Council President Neil Dierks told Dow Jones Newswires in an interview this week.

 

The "thing" Dierks referred to was the swine flu influenza, dubbed AH1N1 soon after its discovery because it contained swine viral genes - along with avian and human viral genes.

 

Despite continued pork-producer losses over the past two years, supply was tightening this year and the outlook was good, Dierks said.

 

Because of the reduced number of hogs going to market, he said, "a lot of the industry had been anticipating an opportunity this summer to break even or maybe even make a little money," he said.

 

But then the flu outbreak took hold.

 

The Congressional Research Service published a report on May 12, telling US lawmakers that the damage to the US pork industry was significant.

 

"In late April, amid early reports of the spread of [AH1N1] flu, retail outlets reported that consumers were leery of buying pork because of fears that the disease may be linked to pork consumption."

 

And it wasn't just US consumers that were scared away from pork, despite repeated announcements from government agencies that the meat was safe. Countries such as Russia and China, which are major import markets, began banning pork from US states where human infections with A/H1N1 were reported.

 

Reduced demand, Dierks said, meant pork plants closing down for hours to try to reduce supply and that, in turn, meant a slowdown in hogs going to market.

 

Analysts, according to the CRS report, predicted the cost of swine-flu fears to the US pork industry to be about US$400 million.

 

The news for the pork industry hasn't been all bad, thanks to a recent rally in hog and wholesale pork prices that began last week and continued through this week, Dierks said.

 

The markets still aren't back to pre-flu levels, though, and the "psychological impact" continues to "deflate peoples outlook," he said. "Now it's still a question mark as we go forward."

 

And that question mark continues to weigh heavily on the lenders that help fund pork-production operations, Dierks said.

 

The National Pork Producers Council has gone to the US Department of Agriculture looking for help for its members, but has gotten nothing to show for the effort yet.

 

USDA Secretary Tom Vilsack told lawmakers at a House Appropriations subcommittee hearing Wednesday that he is looking for ways to help the pork industry. He said industry representatives have asked the government to buy up $50 million worth of pork, but the USDA just doesn't have the money now.

 

"I'm not sure that we have that kind of flexibility left in the budget," Vilsack said.