Market Preview: 'Swine Flu' – Time to Move On

US - Weekly US Market Preview provided by Steve R. Meyer, Ph.D., Paragon Economics, Inc.
calendar icon 10 November 2009
clock icon 6 minute read

Something bad has happened to you. It wasn’t deserved and it wasn’t’ fair. The people who did it are callous and heartless (at least in regard to you), and lazy, or they would not have done it. But they did it. It’s over. It’s done. You can whine and wallow in self-pity and martyrdom or pick yourself up, dust yourself off and get on with life and the business of raising quality pork.

Yes, that’s easy for me to say and write about, but that makes it no less true. Swine flu (yes, I used the “s“ word) is a done deal, but two truths are now clearly evident:

  1. You are not going to change the name any more than you already have, and
  2. It is pretty clear that the term “swine flu“ is having very little impact now (see below).

So, the next time you hear some nimrod (fill in your own noun, if you like) say “swine flu“ on television, count to 10, get your heart rate and blood pressure under control and put down any sharp object that may be in your hand. More importantly – think about a more productive way to channel the time and energy you would have spent blowing your lid.

Now, you may not like what I am saying here, and you may not totally agree, but in the back of your mind you probably also know that I am right – at least about this topic. It is simply time to let it go and get on with your business.

What has happened to pork producers in the United States, Mexico and Canada is not at all fair, certainly. And, it has hurt even more coming on the heels of the government driving up the cost of your two major inputs to the point that you have collectively lost $5 billion over a two-year period in which you would not have lost money had it not been for those cost increases.

But, again, it is done. May our indignation and anger (and I include mine) rest in peace. There are loved ones to love, missions to accomplish, pigs to move and that curtain on the sow barn needs fixing before the snow flies. From here forward, “swine flu“ will be my cue to think about what positive action I am going to take to make life better for someone. Please join me. Life is too short to spend it angry – even when the anger is completely justified.

Okay, that noise you hear is my soap box sliding back into the closet. I feel better already. I hope you do (or will), too.

Reinforcing Point #2

My two biggest fears for most of this summer have included: “What if demand falls apart when the flu season hits and we have thousands or million cases of novel H1N1 influenza in humans?“ and, “What will happen to the poor guy whose herd is the first to be found infected?“

Both of these concerns held pretty chilling possibilities, but neither has happened and pork cutout values have increased by $6.02/cwt. since the first full week of October (Figure 1). That increase put the cutout value above year-ago levels for the first time since the week of 28 March. Last week marks only the sixth week in 2009 in which the cutout value has exceeded the level of one year earlier.

“Big deal,“ you say. “The only reason this year is higher than last year is because last year was even more of a disaster.“ Granted, you have a point, but consider this: From 1998 through 2007, USDA’s estimated cutout value fell from the first full week of October to the first full first full week of November every year! That includes 2004, when cutout values got into record high territory in December. The average decline was $5.16/cwt. and the largest was last year’s $12.79/cwt.

Further, we have not accomplished this rally by starving the market for pigs and pork. As Figure 2 shows, last week’s slaughter was almost precisely the same as that of one year ago. The September Hogs and Pigs Report said that slaughter should have been 1.8 per cent lower than last year, so we actually brought more hogs to market than were expected and the cutout value went up.

Since 1 September, slaughter has been 1 per cent smaller than last year and 0.3 per cent larger than the level predicted by the September USDA report; more evidence that short supplies have not been the driving force for higher product values.

It is obvious that wholesale pork demand has improved this fall even as the airwaves and some print news outlets have remained inundated with news of swine flu (remember – count to 10 and think of something positive) sicknesses and deaths. And, even as news that novel H1N1 influenza was found in pigs at the Minnesota State Fair and, then, in a commercial herd in Indiana, pork prices improved. Even better, the Indiana producer, his workers and his pigs have recovered. His packer is still buying his hogs and the packer’s customers are still buying the completely safe pork produced from those hogs.

So, please join me in my pledge to move on. Learn the lessons that should be learned, but I urge you to adopt my new strategy for dealing with “swine flu“ (one, two, three, four . . . ). You now know the drill.

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