“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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“Climate Change Seen Posing Risk to Food Supplies” – New York Times, 1 November 2013

According to a UN report by the Intergovernmental Panel on Climate Change, the effects of climate change are now expected to reach the global food supply: during each decade, our supply is anticipated to decline by 2%, while food prices increase. This comes at a time when food demand is also expected to skyrocket — 14% each decade.

The panel’s 2013 report is far harsher than its previous report, from 2007; the 2013 report includes recent research on how vulnerable crops are to heat waves and droughts, as well as more warnings of the necessity to lower global GHG emissions. However, the panel found that carbon dioxide emissions have the added affect of boosting food production — the gas apparently performs as a type of plant fertilizer.

The panel found that the effects of climate change and global warming will hit tropical regions’ food supplies the worst, due to greater poverty rates and tremendous heat waves. Not being able to satisfy global food demand might force us to cultivate more farm land for production purposes — i.e., deforestation, which would speed up the effects of climate change by releasing significant quantities of carbon dioxide into the atmosphere.

Sweeping climate policy reforms, like the Obama Administration’s, though helpful, come a little late: the report finds that such actions might not be drastic enough to slow down the effects of climate change; advantages from steps, like curbing emissions, will generally be seen late in the 21st century.

November 20, 2013

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“Livestock Market Adrift Without USDA Data” – Wall Street Journal, 7 October 2013

With the lapse of government funding on October 1, the USDA had to shut its doors, forcing the department to discontinue updating prices for pigs in the cash market, which has caused an upheaval in the livestock market.

Cash and futures markets use the USDA quotes as a reference point for trading. A lack of pricing means that the US’s largest meat manufacturers, Tyson Foods and Cargill — as well as the farmers and ranchers who sell to these companies — have no way of knowing how much they should be paying for pigs. Both companies have been looking to Urner Barry, New Jersey-based market-research firm, for similar information.

Tyson and Cargill have presented farmers and ranchers with two options: either directly determine a price with the company, or use Urner Barry’s formula to calculate a price. But due to the USDA’s interrupted data stream, many traders are fearful of trading, causing trading volumes to decrease; after the shutdown, trading volumes in lean-hog futures dropped 40%.

Sixteen days in to the government shutdown, Obama signed a bill into law that ended the it. However, it will take the USDA, meatpackers, and farmers and ranchers a period of time to recover from the dearth of information.

October 17, 2013

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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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“Do antibiotics in animal feed pose a serious risk to human health?” – Medical Xpress, 10 July 2013

Medicated animal feed and water, and the risk they pose to humans, is still widely debated in the agriculture industry, as many are on opposing sides.

Though there are moves to create new antibiotics that would allow for less antibiotic resistance, medical experts suggest that scaling down on antibiotic use overall should be our first step. From 2009-2011, 72% of antimicrobials sold in the US were used to medicate water and animal feed. Such additives are regularly given to animals, in order to boost growth and curb disease, and are often unnecessary since livestock are typically healthy; livestock living conditions — sometimes crowded and unhygienic — are what can encourage disease.

In April, we wrote about a new study by Britain and Denmark that showed that bacteria does indeed move from animals to humans. Denmark, the global forerunner in pork exports, seems to be an expert in the arena of antimicrobial use in livestock production: in 1994, Denmark decreased its usage of antimicrobials by 60%, while also expanding its pork production by 30%. From the British and Danish study, we can easily glean that regular antibiotic use in livestock production can breed resistance.

Politics also play a heavy hand in this debate, and contribute to an unwillingness to act.

See our previous blogs on this subject:
Antibiotics and the Meat We Eat
Study Shows Bacteria Moves From Animals to Humans
Antibiotic-Resistant Bacteria Surround Big Swine Farms in China & US

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

July 11, 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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