By: Steve Meyer
With a new year, thoughts turn to what is in store. As Yogi Berra once said, “It is dangerous to make forecasts, especially about the future.” As an economist, I understand that all too well, but let’s look at what should be the four biggest issues for 2019.
African Swine Fever (ASF)
The worst ASF situation is in China, where consumers eat an average of 88 pounds of pork per person annually compared with 18 pounds of chicken and 10 pounds of beef. Pork is a critical protein source, but controlling the virus in China’s widely dispersed 770 million pigs has proven to be very challenging.
Pig losses in China will mount and production impacts will, I believe, become huge when today’s breeding stock losses translate to fewer market hogs in 2019.
The EU seems to have ASF under control in Poland and has taken aggressive moves to eliminate the threat in wild boars in Belgium. But the wild boar population is large and widely dispersed across the continent, and those hogs do not respect borders. The key is whether ASF can be kept out of major commercial production areas in Poland and from crossing into Germany.
Domestic Demand and the U.S. Economy
Domestic pork demand since June has softened sharply versus year-ago levels. While year-long demand will likely be within 2 percent of 2017, June, July and September year-on-year declines for real per capita expenditures for pork (a metric of consumer demand) were 5.1, 2.9 and 10.1 percent, respectively.
The September decline was from a very high level a year ago, but it was a shockingly big number. Pork demand is still good relative to past years, but this recent trend is concerning.
What if the U.S. economy slows? That is not the case yet, but there are indications that this recovery – the second longest since 1900 – may be ending. The next recession likely will not be anywhere as serious as was the Great Recession, and there is no guarantee that an economic slowdown will hurt pork demand. But operating in a growing economy is much more fun than in a stagnant or shrinking one.
Disease Pressure in the U.S.
For years I have told producers that I had never found a “marketing hole” resulting from PRRS losses. I think I have now.
Last winter’s PRRS cases were higher than in any year since 2011-2012, according to the University of Minnesota. Anecdotal evidence indicates that death losses were larger than in any recent year, as well. January through March losses led, I believe, to the large shortfall of pigs in September after producers marketed aggressively in July and August when prices were falling. I can’t say never ever again.
PRRS case numbers have been at or near record lows so far this winter. If that continues, U.S. market hog numbers may grow sharply in the year to come.
U.S. Hog Supplies
Related factors are sow herd growth and productivity growth. USDA pegged breeding herd growth at 3.3 percent for March to May 2018 and 2.4 percent for June to August. According to USDA, litter size growth also slowed. Based on anecdotal evidence, litters appear to have returned to a 1 to 2 percent growth rate in recent months. If all is true, 3 to 4 percent larger pig supplies are in the cards for 2019.