“Global Pork Market Starts to Shift” – Wall Street Journal, 20 June 2014

The swine-disease that has been ravaging the US pork industry for over a year, porcine epidemic diarrhea virus (PEDv), is beginning to impact US pork exports and the global trade. PEDv, which only effects piglets and has no impact on human health, has killed millions across 30 states.

US pork prices in the market have also caused US consumer pork prices to increase. In May, average retail was at an all-time high of $4.10/pound, a 15% increase from the same time in 2013. Increased pricing is persuading big buyers to import pork from other markets. Such a move will likely hit the US pork industry hard, since the US exports almost a quarter of its yearly pork production.

PEDv is certainly a threat to the US pork industry, as the industry is known for low prices and large output. Skyrocketing costs in the US is reshaping global trade: other markets are stepping in and creating their own exporting opportunities.

Wall Street Journal

Wall Street Journal

The USDA projects that US pork exports will plummet by 190,000 tons to 2.2 million tons in 2014. This April, exports to China dropped 13 percent from April 2013, and 37 percent from March 2013. China is the biggest global consumer of pork, and was the US pork industry’s third-largest importer from April 2013 to April 2014.

The USDA reports that Brazil’s exports are expected to grow by 55,000 tons to a total of 675,000 tons. Canada’s exports increased by 16 percent from January to April, compared to export rates from a year earlier. The USDA also projects that Canada’s exports will grow by 20,000 tons to 1.3 million tons in 2014. A majority of these exports will be to the US and China.

Europe’s pork industry has also become victim to disease, the African swine fever, which is disrupting its trade with Russia. Russia banned pork imports from the EU this past January. Similarly, China has placed a ban on pork imports from Poland. Japan’s pork industry has also been hit with PEDv, which has wiped out over 200,000 piglets since Fall 2013.

June 24, 2014

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“Futures Prices Are Going Hog-Wild” – Wall Street Journal, 5 March 2014

Porcine Epidemic Diarrhea Virus (PEDV) strikes again, and is severely affecting pork prices. From last April to this March, the virus has been transmitted across 25 states and killed millions of young pigs. PEDV results in diarrhea and vomiting and is only deadly for young pigs—the virus isn’t harmful to human health or food safety.

The lack of pork is driving hog futures up, just in time for pork’s biggest selling season; summer. Analysts believe that traders might be putting too much significance on the virus—production hasn’t suffered any huge losses yet this year. However, in order to counterbalance any loss and make more money, pig farmers have been selling hogs at heavier weights, which could also help bolster our pork provisions. According to federal data, this year’s supply is on par with, or perhaps marginally higher, than last year’s weekly figures.

This February, the US Department of Agriculture reported it’s prediction for total US pork production as 23.4 billion pounds, 160 million pounds less than US production in 2013, indicating the virus as the main reason for the loss. Since farms aren’t required to inform federal regulators about total deaths, the magnitude of PEDV is unknown.

At the end of 2013, 1,998 cases had been reported; by February 16, around 3,856 cases had been reported. Since January, three states were also added to the list of those affected, totaling in 25. The USDA predicts that US pork prices will jump 2-3% in 2014, a 0.9% increase from 2013.

See also:
Outbreak of deadly piglet virus spreads to 13 states
Mysterious Pork Virus May Hike Bacon Prices

May 12, 2014

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“Mysterious Pork Virus May Hike Bacon Prices” – Fox Business, 7 August 2013

In June, we reported on the outbreak of a deadly pig virus that spread to 13 states, called Porcine Epidemic Diarrhea Virus (PEDV). With no known cure, the virus is continuing to proliferate across America, causing farmers to lose thousands of piglets. The good news is that the disease isn’t transferable to humans, and isn’t lethal for older pigs. The virus is also ongoing in countries like South Korea, China and Thailand — PEDV was first discovered in China in 2010.

In order to fight this disease that has yet to be cured, farmers are taking action to prevent the disease from growing; however, the loss of so many piglets may still give way to increased pricing.

As written in our previous post, PEDV is spread through fecal matter, specifically fecal-oral contact with manure; the infection can be spread by pigs eating diseased feces, or by humans unknowingly transporting feces. Pig farmers anxious to counteract PEDV are concentrating on sanitation, requiring clean supplies, and workers to wear clean boots and overalls. They’re also taking further measures, such as biosecurity plans and cleaning transport trucks with hot-steam pressure washers between shipments.

After a piglet is infected, it only takes 24-48 hours for virus to take full effect; a piglet can become sick within five days. Symptoms include diarrhea and vomiting — PEDV is fatal due to intense dehydration. The disease can infect older pigs, but, so far, has only been deadly for piglets.

Farmers haven’t been obligated to share the number of pig deaths at their farms; deaths may be underreported. Since the end of July, the USDA only knows of 403 PEDV-positive tests, but losses may range in the hundreds of thousands. The National Pork Board is spending $800,000 to investigate PEDV, and study methods for containment and removal.

As far as the cost of the disease go, farmers are likely to take a 7-8% hit to production — a farm could suffer a loss of over 1,000 piglets every week; PEDV has the potential to cost farmers $12-16 more per piglet. While our past harvesting season was abundant — grain prices are decreasing — the disease could definitely take its toll on pork prices.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

August 26, 2013

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“Outbreak of deadly piglet virus spreads to 13 states” – NBC News, 19 June 2013

A new swine virus has been discovered in the US, the Porcine Epidemic Diarrhea Virus (PEDV), and has spread to 13 states, with over 100 positive cases. The virus was initially discovered in May, and has proved difficult to control, even in the summer heat. The spread of typical strains of gastroenteritis usually slow during the warmer months, but this strain of PEDV has proved to be quite resilient.

The disease has a high mortality rate with piglets — 50% — though the mortality rate has reached 100% in some areas. US PEDV is 99.4% identical in genetic structure to the Chinese PEDV that ravaged farms across China in 2010, killing over 1 million piglets. PEDV has been observed in many farming states, including Arkansas, Kansas, Pennsylvania, Colorado, Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Ohio, Oklahoma and South Dakota.

This infectious outbreak could become even more deadly for the pork industry, which is still suffering from last year’s drought: the drought caused feed-grain prices to skyrocket, compelling farmers to slaughter more pigs than normal. Now there will be a scarcity for meat, with the possibility of pork prices soaring as well.

The USDA is still unsure of how PEDV entered the US — the current focus is the livestock transportation system. The USDA also thinks that the infection could have been spread by pigs eating diseased feces, or humans unknowingly transporting feces.

However, PEDV poses no threat to humans or other animals — it is safe for people to eat meat from pigs infected with PEDV.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

June 21, 2013

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“Biofuel producers diversify away from crops” – St. Louis Business Journal, 14 June 2013

There are three key industries that rely on corn: biofuel/ethanol, pork and fructose corn syrup. However, erratic corn prices are forcing biofuel and ethanol producers to diversify, and most are moving to lower-cost non-food and food feedstocks, such as waste vegetable oil, tallow, algae, waste sugar, corn cobs, wood waste and swtichgrass.

This means that some production plants have underwent modifications in order to use these other feedstocks, and while that can be pricey, it has certainly paid off. The biofuel manufacturer FutureFuel has seen considerable gains since introducing alternative feedstocks: in 2011, the company’s biofuel revenue was $141.6 million; in 2012, the company increased this revenue by 35% to $191.4 million.

Last year’s drought yielded a low corn harvest and was detrimental to ethanol manufacturers, who had to downsize production for the first time in 16 years. This year’s harvest is looking to be better, but ethanol and biofuel companies might opt for cheaper feedstocks instead.

This shift is bound to have a significant impact on the corn industry, and we are likely to see an supply of corn that the pork and fructose corn syrup industries can’t cover. We will probably also see noticeably decreased prices, which will, in turn, put more pressure on corn farmers to increase prices to make up for last year and future losses.

This a a true example of classic economic theory at play, where “supply and demand”, along with substitution in competing markets, affects commodity prices in a somewhat unpredictable manner.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

June 18, 2013

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“Hog Prices Slide as Demand Wanes” – Wall Street Journal, 20 March 2013

Hog prices have been steadily declining for the past four months, and are currently at a low. The reasons behind the decreasing demand for pork are interesting, mostly due to economic concerns.

US consumers have opted for inexpensive meats, like chicken, instead of pork; additionally, consumers are feeling certain economic pressures, such as rising prices at the pump.

Pork exports have already dropped 15% from last January, as the big meat buyers — China, Japan, Mexico and Russia — curtail purchases. In the last few years, the US has become fairly dependent on pork exports, as China is the world’s biggest pork consumer. However, as China’s population and demand for the meat grows, the country has stocked up on plenty of domestic supplies. Japan is the US’s biggest buyer, but has been experiencing a weak economy and currency, and doesn’t have the funds for pork exports. Russia has chosen to no longer buy pork from the US, since many US pork farms give their pigs medicated feed that generates leaner meat.

As domestic and international demand for pork decreases, US farmers are faced with larger inventories of pork. People begin to buy more pork during the warmer months, but the continued cold weather has delayed the spring and summer grilling season.

It is hard to say if this trend is cyclical or the economics are changing more structurally.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

May 16, 2013

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“Traders Sow Bets on Higher Wheat” – Wall Street Journal, 15 January 2013

Like our previous post on rising milk prices, wheat prices, too, are on the rise; and this past summer’s drought is to blame.

Pricing on corn and soybean skyrocketed to new records after this past summer, as the drought devastated massive amounts of both crops. Due to continued low rain- and snow-fall, many traders are betting that major increases on wheat prices will, again, occur during the next wheat harvest.

Last week, the NOAA confirmed that 2012 was indeed the hottest year on record. Kansas, the largest producer of wheat, and the southern area of the US called The Great Plains, are still plagued with drought conditions; since summer, soil moisture has greatly diminished, which is a necessity for healthy wheat-crop growth. And recent weather forecasts are not raising hopes.

Wheat prices have increased by 5.1% since the USDA reported that quantities of wheat are less than expected. Traders trust that wheat prices have reached the bottom of the well; however, a continued poor harvest for the US, the largest manufacturer of wheat in the world, could further constrict supplies. A recent survey by the USDA shows that 26% of this year’s wheat crops are “poor” or “very poor”, suggesting that much cannot be reaped from these crops.

The drought has been disheartening for farmers, causing some to plant less wheat this past fall. Additionally, due to low supplies of corn, a main ingredient in animal feed, farmers are going to use more wheat in their animal feed this year. Both of these issues could very well cause a further tightening on an already dwindling wheat supply.

Russia and Australia, two main producers of wheat, have also been undergoing harsh droughts and yielding damaged crops. If record-high springtime temperatures continue, then rain will be a large necessity come March. Major wheat-producing countries are in dire need of some favorable weather this harvest season.

Nobody can control weather and drought, but we can influence factors which affect  weather and climate, especially if they are effected by human actions. It takes a long time to influence climate; therefore, we need to start now on meaningful climate change policy initiatives. It’s not about ideology, it’s about dollars, cents and wheat prices.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

January 17, 2013

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“Food Waste: From Farm to Fork and Landfill” – CNN, 21 December 2012

CNN recently published a chart, mapping global food waste from origination to disposal. Gleaned from this chart are the great food losses amassed by both developed and developing countries, and the improper management and conservation of energy and food sources. Though the world is eager to discuss sustainability, green culture and climate change, it seems that food waste is an often untouched topic; yet, one cannot turn a blind eye to CNN’s statistics.

According to CNN, one-third of food produced is lost or wasted globally, a total of 1.3 billion tons per year. Also according to CNN’s chart, food waste in industrialized countries — 222 million tons — is almost equal to the net food production — 230 million tons — in sub-Saharan Africa. That statistic sheds light on how the world unknowingly wastes vast amounts of food because there are no proper management systems in place. Many of these countries don’t blink twice over food losses; developed countries, like the US, take its food access for granted, while developing countries have continually diminished access.

One would think that since the US is experiencing an economic recession and increased food inflation, it would try to gain control of any food loss; however, that is surely not the case. According to the original source for CNN’s chart, 10% of the US energy budget is used to transport food from farms to households, using 50% of US land and consuming 80% of US freshwater resources. However, 40% of food in the US remains uneaten, which is over 20 pounds of food per person, per month. Americans are unnecessarily wasting $165 billion per year, just on food and water losses alone.

Although we are a world obsessed with green culture and recycling, 3% of food waste is currently recycled. Additionally, 40% of landfill content comes from food waste — uneaten food is going straight into the garbage.

As discussed in previous entries – “Milk Price Fight Boils Over” and “Time Is Running Out to Pass a Farm Bill in 2012″  — US food prices may very well skyrocket due to our country’s indecisive lawmakers. If we are able to properly manage and conserve our food supply, and increase efficiency in our food system and use of natural resources, then we might be able to save ourselves money and food, while also meeting the growing food demand.

Additionally, eating less and eating locally grown food (and thereby wasting less and lowering transportation carbon foot print) promotes a happier and healthier lifestyle, while also lowering personal and societal medical costs.

(source)

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

January 3, 2013

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Time is Running Out to Pass a Farm Bill in 2012

In the US, we have something called a Farm Bill, which is the main agricultural and food policy for the federal government. The bill is renewed every 5 years by Congress, and manages agricultural activities under the periphery of the Department of Agriculture.

The farm bill can actually be a contentious issue, and can affect international trade, environmental conservation, food safety and rural communities. The most current farm bill, which was passed in 2007, expired this September; however, no new legislation has been passed by Congress since then. Many decisions involved in a new farm bill are directly related, and affected by, our recession and the fiscal package.

The White House and Congress are at a political standoff, which is further worrying farmers. It is farmers’ hope that a new bill will be included in the fiscal package before year’s end — if legislation isn’t renewed, then milk and cheese prices will soar, affecting farmers and consumers alike. Extension of current law would be a relief for now, but would only be a band-aid for the existing problem. However, if neither current law is renewed nor new legislation passed, milk pricing would regress to the old system — the Agricultural Act of 1949 — where milk was set at $6 a gallon. The old system of milk pricing is out-of-date and unaligned with our current economy and market conditions.

The Agricultural Act of 1949 delineates how to set milk prices; the act is overridden when a new farm bill is passed, but will be effective if no new bill or extension is passed. The act includes a component that assures that minimum milk prices will cover producers’ costs. The government also assures producers that it will buy milk products at that price point; however, producers typically profit more through the consumer market. Given the existing market conditions, the government-set price could double, which could persuade farmers to sell their products to the government rather than through the private market. Because of this, store prices for consumers could skyrocket. If the government keeps accumulating milk, then it will subsequently have an excess of dairy products in storage. Eventually, prices could decline as the government sells its dairy stockpiles.

Increased milk prices could put American dairy farmers and cheese-makers out of line with the international market; instead of buying American-made dairy products, consumers could be looking at alternatives, such as foreign-made cheeses, and soy and almond milk.

What stands between the White House and Congress passing new legislation in 2012 are disputes over the food stamps program — three quarters of the farm bill goes into funding food stamps. The Senate bill, spearheaded by conservative lawmakers, would cut food stamps by $4 billion.
At this point, farm lobbyists are pushing to have any legislation passed before the new year so that dairy farmers will not have to revert to old legislation. This is an obscure issue that isn’t given much limelight, and many Americans don’t even know of this bill’s existence; yet, deep cuts into the farm bill could greatly affect everyone.
Like most issues facing our country today, the public expects lawmakers and lobbyists to work together and let the country move froward to a market-based system. We think that this is very reasonable expectation; however, it isn’t as reasonable as we think.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

December 19, 2012

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“Milk Price Fight Boils Over” — Wall Street Journal, 13 November 2012

With the drought and soaring feed costs, farmers have had a tough break this year. California’s dairy farmers, however, are experiencing more bad fortune: separate from the federal laws that regulate milk pricing, California has also implemented its own system of pricing. The state sets minimum milk pricing for buyers every month.

California has one of the biggest dairy industries in the US; but growing feed prices and slow economic growth has produced smaller milk production, which has ultimately increased milk prices.

While federal law sets milk prices at $2.50 per 100 pounds of milk, California has lowered its prices in order to benefit cheese-makers. As seen in the chart, California’s prices have never exceeded $2.00; and though prices are slowly increasing, they aren’t increasing quickly enough to save dairy farmers’ businesses.

This year, at least 100 California dairy farmers are closing down; and much of the state’s 1,600 dairy farmers are experiencing financial woes. Though there isn’t a maximum-set milk price, many dairy farmers stay close to the minimum so as to remain competitive. Cheese-makers contest raising the minimum price, since that would persuade cheese-makers to move out of state.

Many think that changing state pricing wouldn’t be enough to prevent dairy farmers from going out of business — most California dairy farmers face additional costs, such as paying higher prices for animal feed since they don’t grow it. This, in turn affects milk production, where milk per cow is decreasing because feed costs have sharply increased.

Some dairy farmers and cheese-makers propose that the market should decide pricing; however, because it takes several years for a cow to develop to full production, it’s difficult for dairy farms to match production to the marketplace.

This situation presents a Catch 22: if California keeps its current milk pricing, then dairy farms go out of business and cheese-makers stay in business; if the state increases milk pricing, then more dairy farms will likely stay open and cheese-makers will leave the state.

How can California save dairies, but also keep cheese-makers in state? Can, or should, the “market” decide the winner and loser, or — based on tax revenue, job creation and retention criteria – is it the state’s decision?

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

November 30, 2012

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