Bacon, pork chop prices could rise 25 percent as virus kills pigs

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Posted: Wednesday, March 12, 2014 12:00 am

Bacon and pork chop prices are set to rise as much as 25 percent this summer as a deadly virus sweeps through the hog herd, killing as many as one in 10 piglets in Nebraska, Iowa and other states.

The disease is called PEDV, or porcine epidemic diarrhea virus. It was new in the United States last year, survived the winter, and is now killing tens of thousands of pigs, mostly the very young. There is no vaccine and no cure for the virus; it doesn't affect people.

“It came out of nowhere and it has been devastating,” said Dennis Hughes, state veterinarian for the Nebraska Department of Agriculture. “It is 100 percent fatal to animals up to three weeks of age, so if it hits your hog farm, it is going to be pretty ugly.”

The prospect of lower pork supplies and higher supermarket prices comes amid already elevated consumer costs for beef. Drought in some parts of the Midwest, Texas and California has led to the smallest U.S. cattle herd since 1951, shriveling the beef supply. According to the U.S. Department of Agriculture, the average retail price for a pound of fresh beef in January was $5.04, the highest price since record-keeping began in 1987.

The high death rate for pigs has rattled hog markets. Contracts for future purchases of hogs traded on the Chicago Mercantile Exchange have reached records in recent weeks as rumor and fear spread about the March 28 U.S. Department of Agriculture hog census, which will show year-over year and month-over-month population statistics.

It is a matter of supply and demand — fewer hogs listed in the census will mean higher prices.

For now, investors are betting on fewer. Tuesday, prices for April hogs on the Chicago Mercantile reached a record of $1.19 a pound. Prices for the one-month forward hog contract are up 36 percent this year, the biggest increase after coffee on the Standard & Poor's GSCI Index of 24 commodities.

“Pork supplies are tightening,” said Brett Elliott, vice president at Harlan, Iowa's Monogram Prepared Meats, a 200-employee plant that turns pig bellies into ready-to-eat bacon. “On the retail level, we expect that increased cost is going to be passed through to consumers.”

Nationally, there were 4,106 cases of PEDV in 26 states as of March 1, according to the National Animal Health Laboratory Network, a cooperative effort among federal, state and university animal health authorities.

There are more than 1,000 PEDV cases in Iowa, the largest hog producer, and 48 cases in Nebraska, the eighth-biggest. Iowa's cash receipts from hogs amounted to $6.7 billion in 2011, according to USDA statistics, with Nebraska's at about $1 billion.

A confirmed case is one in which a single pig has tested positive for the virus; one case can mean hundreds or thousands of other deaths from contagion. The pigs die of dehydration after three or four days of diarrhea.

Iowa's first PEDV case was detected more than a year ago, said Steve Meyer, an economist who works as a consultant for the Iowa Pork Producers Association.

Meyer said PEDV had never before been detected in the United States and perhaps came from infected feed imported from Asia. He said hot weather tends to kill the virus, so some relief might be in store come summer.

“I expect the next USDA report will show litter size is down 10 percent from a year ago,” Meyer said. “And from what I am hearing from the countryside where I travel, I think losses in January were over 10 percent.”

Meyer said demand for pork by consumers is constant and unaffected by small changes in price. Still, he said, a 10 percent loss in the pork herd will mean dramatically higher supermarket prices.

“It will take a while to show up,” Meyer said, “but we could be looking at significantly higher prices, as much as 25 percent or more, from this disease.”

At the 850-employee Omaha bacon plant of Arkansas-based Tyson Foods, the largest U.S. meat processor, there has been no virus-related hog shortage yet, spokesman Dan Fogleman said.

“But we are seeing signs of hog supplies tightening around the industry,” Fogleman said. “When our operations do see a reduction in supply, we will adjust our production as needed.”

Zimmerman Hog Farm near Beatrice, Neb., is disease-free but on guard, owner Brian Zimmerman said. He is keeping outsiders off the property — human visitors can pick up the virus on their clothes or hands and spread it to the hogs. The Zimmerman Hog Farm feed salesman and propane dealer — among others—- have been told to stay away.

“My dad wanted to visit, I had to tell him no,” Zimmerman said. “My banker wanted to visit and I told him no, too.”

Zimmerman, who has about 200 sows used for breeding, said many folks in his profession think the virus came from blood plasma imported from Asia. The plasma is high in protein and used as feed for baby hogs. He said the disease will sicken older hogs, sometimes stunt their growth, but that most recover if they are not too young.

Zimmerman said he doesn't know where grocery store prices are going. “But I do know that fewer hogs will mean higher prices, period.”

With the big USDA census about two weeks away, everyone is waiting to see what will happen next, said Chad Henderson, an analyst at Wisconsin-based Prime Agricultural Consultants. He called the rally in hog contracts one for the ages.

“For hog farmers, it is the equivalent of when corn went to $8.50 a bushel,” Henderson said. “But the ultimate question will become at what point do consumers put the pork chop back in the case and look for a substitute? The pork market has never experienced that, as we have seen with some of the higher cuts of beef.”

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