Industry snapshot: pork looks stable despite looming concerns

Iowa State University Extension’s Southeast Iowa Swine Specialist Matthew Romoser said he was cautiously optimistic about pork’s current market standing.

“I wouldn’t say things are all sunshine and rainbows, but I think we’re at a pretty stable point in the industry where I think producers can be profitable and be able to manage some risk,” he said. “We’ve hopefully got a bountiful crop coming this fall that will help producers manage meat costs and so forth. I think everyone’s pretty idle right now, but there’s not too many hardships.”

While pork prices are down from their midsummer high around $125/hundredweight (cwt), Romoser said that rally was an outlier prompted by complex determinants of supply and demand.

“(Summer) saw increased pork exports to China, Japan and Mexico while at the same time we were sending fewer hogs to be harvested as a result from PRRS [porcine reproductive and respiratory syndrome] losses from earlier in the year,” he said. “Simultaneously, like many industries, labor shortages became an issue and packing plants were hindered in their ability to keep up with demand … when line speeds in packing plants became federally regulated, reducing the number harvested daily.”

Prices today have settled around $75/cwt for lean hogs due to more routine factors, according to Romoser.

“This is largely in response to not exporting as much pork as we’d seen early in the year, as well as the seasonality of the industry where we have more pigs in production and going to slaughter compared to other times of the year,” he said. “Labor continues to be an issue in packing plants.”

Despite the stability, some concerns persist. Romoser said all eyes were on the African Swine Fever, a highly contagious and lethal disease affecting pigs, with a reputation for disrupting national pork markets.

“It’s a very big deal, very scary situation. Right now the U.S. would be classified African Swine Fever free,” he said. “If the U.S. were to contract African Swine Fever, our exports would be shut down immediately and effectively take about 25-30% of pork production out of production, because we just wouldn’t have any place to go with the excess pork we would be producing.”

Such an event would have cascading effects on other markets.

“With that many pigs on feed and less pigs being able to go elsewhere, there would be, I imagine, a pretty significant drop in corn and soybean markets as well,” Romoser said. “It would affect agriculture as a whole, certainly something that we don’t want to deal with.”

Another issue garnering attention is the specter of Prop 12, a California state law taking effect in 2022 that would require pork sold in the state to come from pig farms meeting certain animal welfare criteria.

Romoser said such a move would have a substantial impact on Southeast Iowa’s pork producers, with California composing 14-15% of demand for the product. Still, the exact implications of the law are unclear with legal and logistical questions still unresolved.

The legal concern is based on arguments about California’s jurisdiction over the interstate commerce Prop 12 would implicate.

“What’s being implemented in one state affects what’s going on in other states, and that’s sort of the argument where it lies right now,” Romoser said. “What’s the ramification and how does that interfere with interstate commerce is the big question right now.”

Romoser said the logistical issues centered on the current inability to distinguish between Prop 12 compliant and non-compliant sources in the shipping process.

“Right now it’s not clear on how that product is going to get differentiated at a plant,” he said. “It’s unclear how a producer can be compensated or paid extra just by trying to meet a certain market. It’s easy for packing plants to distinguish between product that comes from a Prop 12 farm in Iowa, but as soon as it gets to a retailer or goes on down the line, it becomes unclear what product is compliant.

“Yeah, maybe some folks in California would be willing to pay more, but it’s unclear how that’s going to transfer from consumer to producer and if there would be any real financial incentive to switch over.”

Romoser also said California’s regulations were scientifically questionable.

“The square footage and requirements that are being set aren’t based on anything scientific,” he said. “I think the industry itself is willing to adopt stuff that will affect animal welfare and animal well-being, but we’re only going to do it if it can be scientifically proven that it winds up being beneficial.”

Romoser said that mix of uncertainty, costs, and lingering questions meant little change in the pork market, at least for now.

“I don’t think that producers are ready to pull the trigger on making adjustments to their sort of production or putting any more costs into their production just to accommodate something they’re not certain about,” Romoser said. “It would amount to a lot of your independent producers or smaller family farms having to invest back into your facilities in order to adjust to these regulations not really based on anything scientifically.”

Comments: Kalen.McCain@southeastiowaunion.com