Swine flu fears bring job cuts to Pleasant Hope
Missouri's pork producers wrange with high feed costs and reduced demand brought on by the global economic crisis
Sunday, May 17, 2009 7:00 PM
Fear of the H1N1 flu virus - popularly referred to as swine flu - is having a significant impact on Missouri's pork producers.
Joe Maxwell: Flu outbreak forced Heritage Acres Foods to temporarily lay off 40 workers in Pleasant Hope.
Just as people don't get chicken pox from eating or handling chicken, they don't get swine flu from eating or handling pork, but when the words "swine flu" spread across the globe at the end of April, fear trumped fact.
"Whoever named it 'swine flu' scared a lot of people, and it had negative impact on demand for pork," said Ron Plain, professor of agricultural economics at the University of Missouri-Columbia. "It's been costing U.S. hog farmers about $10 million a day."
It's also costing local jobs.
Heritage Acres Foods in Pleasant Hope has temporarily laid off 40 of its skilled production workers - approximately 40 percent of its production staff - after export orders for its pork products were suddenly canceled.
"The week that the news broke and words such as 'pandemic' began to be used, much of our export business immediately ceased," said Joe Maxwell, CEO of Heritage Acres.
When the crisis hit, the Pleasant Hope processing plant, operated by Heritage Acres in partnership with Tai Shin USA, was poised to begin production in earnest.
"We had 100 percent employment, we felt all our employees were trained and the (purchase orders) were coming in to gear us up to stable capacity, what we consider break-even capacity," Maxwell said.
Then, Mexico sneezed.
According to pork producers and processors, the H1N1 flu outbreak - and its unfortunate misnomer - couldn't have come at a worse time.
The new flu virus was dubbed swine flu when lab tests revealed its genes were similar to flu viruses that normally occur in pigs in North America. The virus also contains genes from avian and human viruses, according to the Centers for Disease Control and Prevention.
Even before the flu hit, American pork producers already had been taking it on the chin for a while.
"April was the 17th month out of the last 19 that hog producers lost money," Plain said. "And May's not getting any better."
"The general state of the industry is not good," said Don Nikodim, state executive for the Missouri Pork Association.
Hog prices were up in 2008, but so were expenses, Nikodim said. Corn rose from about $2 a bushel to more than $7. Feed costs essentially tripled due to high fuel costs and speculation in the commodities market, and the global economic crisis reduced demand for pork at home and abroad.
Some producers, already stretched thin, will ultimately fail.
"We're on the phone with many of our associates around the Midwest, and there are pork producers - not necessarily those producing for Heritage Acres Foods - that are going out of business," Maxwell said.
The producers being hit hardest are the very large and the small.
"Your major packers in the country have just stopped buying from the smaller producers," Maxwell added.
Nikodim noted that, while the Missouri Pork Association hasn't seen or heard a lot about producers exiting the business, the group recognizes that many are under severe financial pressure.
"When you lose as much money as they've been losing for as long as they've been losing it, the pressure mounts," he said. "Time is going to tell if we get some profitability back in this thing."
Bringing home the bacon
Pork is big business for Missouri. In 2007, it had a statewide economic impact of $1.1 billion, including 5,000 full-time jobs in pork production and an economic ripple effect of 32,000 jobs, Nikodim said.
In Missouri, as nationally, exports are essential to the pork industry.
"Last year, 20 percent of the pork we produced (nationwide) got exported, so the meat from one in every five hogs went overseas last year," Plain said. "It's looking like we're not going to do near that well this year."
It should be noted, however, that 2008 was an unusually good year for U.S. pork exports, driven by the reduced value of the dollar abroad and unprecedented demand from China, which stepped up imports in preparation for the Olympics.
"Japan has traditionally been our largest export destination," Nikodim said. "Last year, China took first place in that. They imported just tremendous volumes of pork, particularly during the mid to latter part of the year."
In 2009, U.S. pork exports were down 10 percent in the first two months of the year, with forecasters predicting the trend would continue. Now, Plain said, "We're probably going to be down it looks like more than 15 percent."
Hope in Pleasant Hope
While many of the pork industry's woes are likely to continue for the foreseeable future, the export crisis related to the H1N1 flu is already passing.
Most U.S. trading partners have backed away from restrictions on pork, and at press time, negotiations were ongoing with holdouts Russia and China.
"We're recovering quite rapidly," said Russ Kremer, chief operating officer for Heritage Acres.
"We're calling some people in this week, so I think we'll be back as strong as ever in a couple of weeks," he added.
Moving forward, Heritage Acres will focus on building its antibiotic-free, humanely raised pork business targeted to domestic, and especially regional, customers. Traceable, sustainable agriculture is the new trend, with customers wanting to know "who produced the food, where it was produced and how it was produced," Kremer said.
Major clients for Heritage Acres' organic products include Chipotle and Whole Foods Market.