Hog Prices Lower On Swine Flu Concerns
STEVE INSKEEP, host:
Let's consider that question: what's in a name? In the case of swine flu, maybe more than a billion dollars. You cannot get the disease from eating pork, and just last week, China promised to lift its ban on American pork. Yet, as Frank Morris of member station KCUR reports, the pork industry suffered from the swine flu tag and is still shaking off the damage.
FRANK MORRIS: Things were lousy for most U.S. pig farmers before the swine flu virus popped up this spring. The price of feed, their biggest expense, had nearly doubled, international demand slumped and producers like Brent Sandige(ph), were then losing about $20 on every animal they sold.
Mr. BRENT SANDIGE (Pig Farmer): It's kind of ugly.
MORRIS: Like most survivors in this business, Sandige runs a huge efficient operation - 30,000 hogs. Big gleaming grain bins and long, low sheds have taken over the family farm where he grew near Marshall, Missouri. It's smelly here and there's hard work to do, but for Sandige, the farm's a haven from the market.
Mr. SANDIGE: I don't even think about it when I'm here around the pigs. You know, when you're back in the office and you're looking at dollars coming in and dollars going out, that's when you, you know, reality sets in. But when you're out here, you're just, I mean, I'm just looking at pigs. I just love being around pigs.
MORRIS: Sandige first read about this year's swine flu outbreak on his office computer late one Friday evening - Friday, April 24th - a now infamous date in the pork industry.
Mr. SANDIGE: You didn't realize it was going to have the dramatic effect. I mean, I didn't fully appreciate it 'til a few days later. And then I, I think this is going to, this is going to be a significant problem for us.
Professor RON PLAIN (Agricultural Economics, University of Missouri): By Monday, we started moving prices lower and they dropped sharply.
MORRIS: That's Ron Plain, an agricultural economist at the University of Missouri. He's tracing the plunge in hog prices, triggered by the H1N1 outbreak. Hunched over charts heaped in his office, Plain says most pig farmers were just about to turn a profit before the virus hit.
Prof. PLAIN: We look at hog prices from April to September - normally they go up five percent and are higher in between. This year they went down almost 12 percent, 11.9 percent.
MORRIS: Demand for pork cooled just as the summer barbeque season usually heats it up. Then China and two dozen other countries clamped import bans on U.S. pork. The pigs kept coming, though, and consumers saved a little while hog farmers got clobbered, losing big on every sale. Farm state politicians waged a battle to eradicate the swine flu name and substitute H1N1. After all, there's only one known case of the virus being transmitted between pigs and humans, and in that case it's the pig that got sick.
But Ron Plain says all summer long swine flu depressed prices. He took the price investors projected the day before the virus hit and compared it with the actual prices paid over the summer, weighed other factors, and came up with a calculation. He determined that the imagined threat, alone, cost the industry more than $900 million. And, Plain says, that nearly one out of six hog producers could ultimately lose their livelihood over the swine flu scare.
Prof. PLAIN: Gosh, from the media standpoint, it's a very catchy name. But from the standpoint of hog producers, it comes with a real cost to them.
Mr. BILL KESSLER(ph): This went pretty deep into the reserves that we had.
MORRIS: Bill Kessler raises hogs, corn and soybeans near Mexico, Missouri. Like lots of farmers, he's worth a lot less now than he was this spring. Many are operating on borrowed money, and, Kessler says, that's drying up fast.
Mr. KESSLER: When you don't have the cash flow and you don't have the tax records that show you've made a profit, well the banks just have to tighten their belt too.
MORRIS: And most farmers don't appear likely to fully recover from their bout with swine flu any time soon. But as more of them go out of business, supply should tighten by next spring, and the consumer prices will go up and hog producers, still standing, will finally be able to make some money.
For NPR News, I'm Frank Morris in Kansas City.
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