Swine Flu Fallout in the Food Biz

Swine flu is making U.S. hog farmers sick thanks to bans on pork imports by China, Russia and a dozen other counties.

Over the past months, a fall in hog prices attributed to groundless fears about swine flu have costs producers over $81MM. There is no connection between pork products and the disease, which can only be spread by human-to-human contact. Up to 20% of U.S. pork goes for export, with China and Russia big purchasers: last year China bought $700MM ranking 3rd behind Japan and Mexico; Russia ranked 5th at $476MM. Pork industry observers see politics and the chance to grab market share for its domestic producers as the real reason behind the bans. China had already refused to buy any U.S. pork from hogs given the drug ractopamine designed to produce leaner meat, despite the drug’s having been approved by the Federal Drug Administration and 26 other countries.

That's likely because the outbreak of SARS in 2003 left China smarting over criticism it hid the extent of the epidemic, and it has reacted with unusual speed and obstinacy this time. Russia insists on inspections of all U.S. pork facilities, but has banned imports from over 30 plants without much explanation. The plants make up 50% of the U.S. export capacity to the Russian market. Russia’s actions are in violation of the World Trade Organization rules, but it isn’t a member. Russia has made no secret of its desire to become self-sufficient in both pork and chicken, yet denies any commercial motives for the bans. Other countries with bans on U.S. pork are Ukraine, Azerbaijan, Kazakhstan, St. Lucia, Indonesia, Thailand, Bahrain, Uzbekistan, Kyrgyzstan, Jordan, Macedonia, South Korea and Malaysia.

Domestic demand for pork has recovered after an initial drop following the outbreak of swine flu. Industry sales topped $97bn in 2008. Information geeks will appreciate that 1/3 of American hog production comes from Iowa with North Carolina, Illinois and Minnesota making up the lion’s share of the remainder. A fall in commodity prices had seemed like good news for pork producers.

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