Watching Pork Industry Dynamics Like…

With the 4th of July less than a week away, it’s the perfect time to do a status check on an American BBQ staple: pork.

Not so fast… The long simmering feud over pork processing line speeds will reach a crescendo as a federal judge’s order will go into effect.

Starting today, those line speeds will be capped at 1,106 hogs per hour. Research by Iowa State’s Dr. Dermot Hayes found that this change alone will reduce the U.S.’s pork processing capacity by 2.5% and lead to $80 million in lost revenue for small pork producers.

Back to the wild west? While processing speeds slow down, implementation of Prop 12 seems to be moving at breakneck pace.

The infamous California ballot measure aimed at establishing animal care requirements looks to be close to reality, and the news may not be all good for the consumer. Local supply is expected to see a 50% drop in California once the new requirements take effect. That supply shortage will lead to much higher prices.

A silver lining… maybe? Many in the industry were predicting a tough Q4, worried that the market-ready hog supply might outpace slaughter capacity. In its June report, the USDA showed a 3% drop vs. last year’s number of pigs under 120 pounds. Fewer small pigs in June means fewer to slaughter later in the year, which might keep everything buzzing along.

Need For Speed

The pork industry is doing all it can to avoid tapping on the processing brakes.

A federal district court ruling from late March will slow line speeds at pork processing plants on June 29 if left unchallenged. The court ruling came by way of the United Food and Commercial Workers Union, which cited worker safety as the reason for the ruling.

Pork producers are saying, “don’t slow our roll” because it would dramatically affect U.S. hog producers and especially hurt smaller producers – to the tune of more than $80 million in reduced income.

Really pork (g)rinding our gears. Iowa State University’s analysis shows the shift would cause a 2.5% loss in pork packing plant capacity and force plants to use more mandatory overtime.

Show me the data. Some plants have been operating with faster line speeds under a pilot project for years. They were processing 1,450 hogs per hour. The slower line speeds would max out at 1,106 hogs per hour. The Iowa State analysis predicts the fewer pigs going to market, the more backlog, which would drive prices down and hurt farmer profitability.

One example of that is at Seaboard Foods. They calculated that scaling back the line speeds would result in 126,000 excess market-weight hogs barreling out of the company’s production pipeline over the following ten months.

Where this goes: The National Pork Producers Council is urging USDA to intervene before the ruling takes effect at the end of June.

Prop 12 Puts Pork Production in Peril

Consumers continue to push for more oversight into animal welfare and sustainability practices, and California’s Proposition 12 (formally titled Prevention of Cruelty to Farm Animals Act) is just the latest in a string of measures that will significantly impact the nation’s livestock industry. It passed in November 2018, with more than 60% of the California vote.

In a nutshell: Proposition 12 sets new criteria for the confinement of sows (and laying hens, and veal calves). Under the new guidelines, each sow will require at least 24 square feet of space. Not in compliance? Pork would be pulled from sale.

And one other tiny detail: Pork produced in other states for sale in California must also comply.

Constitutionality challenges: The North American Meat Institute has already challenged the legality of Proposition 12, but the US Court of Appeals ruled against that challenge; they’re now asking the Supreme Court to review that ruling.

And this… The National Pork Producers Council and the American Farm Bureau Federation have also sued the state. Oral arguments are expected at the 9th Circuit Court of Appeals on April 14.

Potentially pig changes comin’: If those legal challenges aren’t successful, the new regulations are set to take effect on January 1, 2022 — and how it would impact markets and procedures around the world is open to speculation.

With less than 4% of the current U.S. sow herd raised per the Prop 12 rules, many fear that immediate supply chain disruptions will be a near certainty.

China Is Trying to Think Postive-ish

China pork producers are playing a never-ending game of Whack-a-Mole with African Swine Fever [ASF].

Three years into the war against the global swine virus, the Asian nation faces new cases in its own backyard and in neighboring countries.

Where things stand… Since the start of 2021, six new outbreaks have been reported in the key pork-producing regions of Sichuan and Hubei. The relatively small clusters of positive cases are being chalked up to a seasonality bump and new strains.

The silver lining: The seasonal bump shouldn’t have a meaningful impact on supply, and the new strains are less harmful, though still highly transmissible.

But China is definitely feeling the sting.

Domestic hog prices have plummeted 19% since the beginning of the year. And while the USDA expects 14% growth of the Chinese herd this year, these ASF speed bumps could knock those efforts off track.

And about those neighbors…

  • Malaysia’s 3,000 cases this year put them on China’s blacklist as no imports of pigs or boars are being accepted.
  • Vietnam is also getting the stink eye after 2,000 ASF-positive pigs were found.
  • Russia’s rough Q4 2020 of ASF madness is finally under control after +500K pigs were culled.

What’s ahead: With no commercial vaccine in sight and shakey market prices, it’s going to make for another interesting year for the China pork industry.

It’s Baaack

Asia just can’t seem to shake the African Swine Fever.

After new strains of the virus popped up across China last month, now Hong Kong is facing a test. For the first time in two years, the independent region found ASF in its domestic herd. Authorities ordered 3,000 pigs to be culled.

Here we go again: The last ASF flare-up in 2019 was a fluke. 10,000 pigs imported from mainland China, the epicenter of the pork pandemic, tested positive for the virus and had to be culled.

Zoom out: Hong Kong isn’t alone. New, sporadic cases continue to resurface in other Asian countries. Indonesia, South Korea, and Cambodia are in the mix, attempting to tamper wild boars who are spreading the disease.

FDA Stamps ‘APPROVED’ on GMO Pork

Genetically modified pigs have gotten the official thumbs up from the FDA this week.

With the approval, GalSafe pigs can now be utilized for food and medicinal purposes. The first-of-its-kind livestock alteration was brought to life by Revivicor, a regenerative medicine company.

The details: GalSafe pigs are modified to remove alpha-gal sugar from the animal’s cells. An allergy to alpha-gal sugars in humans, while rare, is believed to be caused by lone star tick bites.

As pig cells and tissues are commonly used in the medical world, there is lots of excitement. Avoiding allergic reactions to otherwise life-preserving drugs or transplants is a big deal.

The meat of the matter: The dinner plate discussion is where contention lies. Allergen studies by the FDA focused on pharmaceutical use, rather than consumption, although the department notes that the meat is safe to consume. Taste, nutritional factors, and shelf-life are identical to non-GMO pork.

But not so fast: Don’t expect to see GalSafe pork in the meat case next week. GMO labeling will have to be worked on. Plus, the meat will only be available via mail order anyway.

And even then, it’s no sure bet. Take it from AquAdvantage salmon, the only other GMO-approved consumable animal protein for humans. Five years after FDA approval, the fish filets are still not available for consumers due to continuous legal challenges.

  • Worth noting: The National Pork Producers Council has begged for the White House to move livestock genetic editing approval over to the USDA, noting the ‘FDA’s regulatory overreach’ will slow down U.S. producers’ ability to compete globally.

Bottom line: FDA approval might just be the starting line for GalSafe pigs. Time will tell if and when it becomes commercially available.

The China Pork Playbook

Go big or go home: the mantra of China’s top pig producer.

Muyuan Foods is building the largest single site hog farm in the world. After African Swine Fever [ASF] demolished China’s pig population and sent pork prices to double their previous record, Muyuan is banking on getting a slice of that profit pie.

And they’re in a position to win. While corporate pork companies felt the sting of ASF, they quickly recouped losses as prices spiked. Their counterparts – the small, family-owned herd – didn’t have that same outcome.

But innovation is the name of the game in order for Muyuan to make the moolah. The new farm is highly automated to increase efficiency. State-of-the-art thermal imaging cameras and air filtration systems are being installed to keep disease out.

The mega farm, by the numbers:
→ 21 buildings across the campus
→ 
84,000 sows, 10x a typical U.S. breeding farm
→ 
2.1 million pigs produced a year

China’s goal: Reduce dependence on the global pork market. U.S. producers know this story all too well. Thanks in part to China plus others, U.S. pork exports account for 29.2% of production and were up 15% to $6.33 billion through the first ten months of the year.

How this ends: It will be no small feat for Muyuan and others to keep ASF out of these high-density production sites. With no vaccine or cure available for the deadly disease, China pork producers are truly betting the farm on this pork herd rebuild.

US Pork Fears an ASF-Infected Feed Fallout

For two years, the US pork supply chain has pulled all the levers to halt African Swine Fever [ASF] from reaching the homeland.

Their next unlikely enemy in maintaining the ASF-free status: organic soybean meal.

As boatloads of the crushed protein supplement hit US ports, the industry is nervous as ASF can survive within the feed ingredient during oceanic trips.

How we got here: During the PED virus in 2014, many worried the disease was spreading via swine feed. But at that time, international ingredient traceability was practically non-existent.

Fast forward to today and all soy-based products from China, Russia, and Ukraine are getting the side-eye.

With a mean holding time of 168 days in the feed, ASF could sneak itself into the feed supply chain and be disastrous. Mills could potentially mix and distribute the virus while trucks would criss-cross farms depositing feed. Super spreading at its finest.

It would get ugly, fast.

So one might ask: why not ban importing ingredients from ASF-positive countries?

Welp, that’s a no-go. Trade agreements won’t allow it even in the face of an industry-shattering risk.

The next best defense? Data.

Two swine gurus – Gilbert Patterson, chief medical officer of VetNOW, and Scott Dee, director of research at Pipestone Vet Services –  have partnered up to attack the feed sourcing issue.

Using government and trade data, they built a tool to trace how and where feed ingredients enter the US. And while analyzing 325 Ports of Entry could be chaotic, the tool shifts focus only to ports where potentially contaminated feed is hitting the dock.

Plus, the team is advocating to mimic Canada, where product received from ASF-positive countries is siphoned to a separate holding area to wait out the virus’ life cycle. Only then does the ingredient get released into the animal food chain.

What’s at stake: An ASF outbreak in the US could cost the pork industry up to $50 billion over a decade. Pork exports would evaporate overnight and the entire protein space would experience depressed prices. Furthermore, US grains would get smacked too. There’s no room for error. The focus on feed will continue long into 2021.