The H1N1 Virus – the so-called Swine Flu – has taken over television news, radio and the print media in past couple of weeks. The name given to the virus initially was very misleading to the general public, and lead to very negative impacts for the swine industry. Despite efforts by USDA, the World Health Organization (WHO) and even the United Nations (UN), as well as concerted publicity efforts by the National Pork Board (including it’s Minnesota affiliate), many of the major media outlets and political leaders continue to use the slang name for the viral disease, rather that the official name, H1N1.
The resulted impact of the H1N1 outbreak in Mexico, the U.S. and other parts of the world has been devastating to the U.S. pork industry. Lean Hog Futures dropped over 15% from April 27 to April 30. Even though the H1N1 virus is respiratory in nature – and has nothing to do with eating food – retail pork sales were off dramatically in many parts of the U.S. and other parts of the world. Many countries around the world restricted U.S. pork imports, even though there is not even a remote link between U.S. pork and the H1N1 virus. The export market is a key component to the U.S. pork industry, as pork exports have accounted for 15-20% of U.S. pork sales in the past couple of years. U.S. pork exports were already down 8-10% from the same level in 2008, prior to the H1N1 virus outbreak, due to the struggling world economy.
The impact of the H1N1 virus is felt locally by upper Midwest hog producers, and could soon have a major impact on the regional economy. The drop in the hog market of 15% or more is a loss of $30-40/head in a typical market hog (250-280 lbs.). In a 2,400-head hog-finishing barn, this loss represents a loss of $75,000 or more. On the average, most Midwest hog producers have shown losses in the past 18 months. According to Iowa State University data for average returns from farrow-to-finish hog production, producers have only shown positive results in two of the past 18 months, and losses have exceeded $20/head in 12 of those months. Early in 2008, hog producers were significantly impacted by the rapid increase in feed costs, and showed negative net returns, even though pork exports and hog market prices were quite strong. Then in the last half of the 2008 and early 2009, feed prices dropped somewhat. However, hog market prices also dropped sharply due to excess supply of pork and the struggling economy, resulting in more negative returns. Now, just as there was a glimmer of hope for net returns from hog production in the coming months, the H1N1 virus outbreak has lead to another round of potentially very negative returns for hog producers.
The continued profitability struggles of hog producers and the Midwest swine industry could have far reaching impacts on the overall economy of the Midwest and other regions of the U.S. Livestock production accounts for nearly half of gross farm income in many parts of Iowa and Minnesota, and the hog industry is the key component of the livestock sector, as Iowa and Minnesota are currently the top two hog-producing states in the U.S. Crop producers rely on a strong livestock industry to keep grain demand and market prices strong for corn and soybeans. Many crop producers in the Midwest have constructed hog finishing barns for major swine producers in order to use swine manure as a fertilizer resource, thus reducing their crop input costs. Many local communities in southern Minnesota and Iowa have remained strong during the current U.S. economic downturn, mainly due to a strong ag economy, and in particular to a solid hog industry. Following the aftermath of the recent H1N1 outbreak, this economic stability of the region seems a bit more threatened. The real key will be how quickly the pork industry can recover from the recent unfair negative publicity of the H1N1 virus, and if the pork industry is able to again return to some positive net returns in the coming months.
Soybean Planting Begins
Since May 1, farm operators in southern Minnesota and northern Iowa have begun planting soybeans. Field conditions are almost ideal after recent rainfalls; however, there is some concern due to relative cool temperatures that persisted in late April and the first few days of May. The good news is that temperatures warmed up a bit over this past weekend.
Most of the corn in the region is planted, with the exception of a few fields that were delayed due to tiling installations, as well as spring fertilizer and manure applications. Corn planting and fieldwork is much more delayed in central and northern Minnesota due to cooler temperatures and wet soil conditions; however, corn planting has progressed significantly in the past week. On a national scale, corn and soybean planting is ahead of schedule in the western Corn Belt, but is well behind schedule in the eastern Corn Belt due to continued wet weather and soggy field conditions, especially in the significant states of Illinois and Indiana.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at [email protected].