The worldwide swine flu news keeps getting better, with its mildness and mellowness calming a lot of folks around the world from their previous state of near-panic.
But things don’t get any better for the Canadian hog industry, with the weekend revelation of an Alberta pig herd becoming infected from a barn worker who had just returned from Mexico. China quickly banned pork from Alberta (regardless of the fact that meat doesn’t carry or support the disease) and Russia is now using the outbreak as an excuse to ban pork from much of Canada.
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The Americans have not yet used the Alberta outbreak as an excuse to shut the border, but that’s always a risk, as we’ve learned from our recent experience with BSE and trade battles.
For about a week we could hope that H1N1 would remain within the human population and not rattle consumers who might not realize pigs getting infected from a person isn’t necessarily a big deal. (Flu often travels both ways.) But not only has it now been proven to exist in a herd, but it’s in a Canadian herd. That’s not going to mean good things for Alberta producers, who may face movement complications and discounting because of the situation. And it suspends a Damocletian sword over the rest of the Canadian industry, threatening at any time to fall. The Canadian industry is incredibly vulnerable to trade blockages because we not only export a large proportion of our pigs and pork to the United States, but are in many ways (especially here in Manitoba) just an outgrowth and the furthest northern extension of the Midwest U.S. hog industry. COOL’s already stripping the gears of the Manitoba industry, which has generally exported most of its weanlings to Iowa and Minnesota and doesn’t have enough feeder barn room to feed out all the animals born here. Any exacerbation of that situation would be a disaster.
Overall pig prices have been taking a beating from the H1N1 outbreak. May futures were killed last Monday and have kept falling, falling further today. But here’s the only good thing I’m going to talk about here today: the further forward you go in CME futures months, the less prices have been affected. That’s the market saying the giant collective it represents thinks this flu thing is going to pass – quickly. By December the fall has been very modest and has nicely recovered a lot of ground lost in the initial crash last Monday.Â
The thinking seems to be that trade restrictions and any reduction in pigeating from the present outbreak will occur in the short term, but then seep away, with little travelling into next winter. December lean hog futures are back up to $63/cwt, falling from only $64.50 a week ago. That’s not a huge honker of a deal. Prices have crawled back up from an intraday low of about $60.25.Â
But it’s the nearby, May futures everyone’s watching, and they’re just ugly. A week ago the May price was floating around $70. Today it’s down to a little over $56. Instead of a premium to December, which it had been, it’s now at a discount.Â
Let’s hope the stock market rally continues. While that’s going on, the world’s public is unlikely to go completely ape about swine flu and there’s a chance to get this ugly little patch of the road behind us before any longer term damage is done.
