2022: The Post-Covid Year of Disruption

By Moe Agostino

Although there is a growing list of factors that will disrupt the hog industry, careful planning and risk management can limit the severity of impact on your operations.

Inflation risks are rising, with CPI YOY change moving higher

The US pork industry is still feeling the impact of Covid-19 - from higher feed and fuel costs to a lack of available labor thanks to increasingly threatening macroeconomic and demographic trends.

Structural drivers, such as labor shortages and inflation, will continue to keep the 2022 pork outlook interesting.

Overall, the predicted inflation in 2022 will make profitable operation more challenging for producers and consumers, which could ultimately impact demand for pork.

Regulatory constraints will also raise costs in the year ahead - not only in California with Proposition 12, but with line speeds, immigration, and water use.

However, the big hot topic and top of mind for pork producers, is biosecurity.

Not only the efforts to continue to keep African Swine Fever out of the US, but also to address many of the herd health challenges that many farmers experienced in some key hot regions this past year.

The 1-4-4 strain lingered into the warm, dry summer months of 2021 when virus infection rates typically decrease. It can take as much as 300 days, and 50-60 days longer to remove it out of a herd.

In Q1 of 2022, keeping PRRS 1-7-4, 1-8-4, and 1-4-4 at bay has been an extreme challenge and, in some regions, the number of cases has been both devasting and overwhelming.

To better resolve the issue, producers need to explore every tool in their kit to limit exposure or consider diversifying their risk.

According to Dr. Paul Sundberg DVM, Executive Director Swine Heath Information Centre in Ames, Iowa, “Overall, the winter of 2021 to 2022, looks a lot like the winter of 2020 to 2021, but we have regional outbreaks that are going on this spring.

“Those outbreaks make it look like cumulatively, we may be over what we were last year as far as PRRS outbreaks go.”

Sundberg added that PRRS is unique and easily spreads by aerosol.

On a finishing floor, the PRRS outbreak is a cloud of virus, and is a risk to any breeding herd in the area due to the way finishing sites are built.

States like Nebraska, Missouri, Indiana, and Illinois are all having more outbreaks than usual with the 1-7-4 variant.

Iowa and Minnesota, however, are having issues with the 1-4-4 variant, with many reports of total depopulations and the restocking of breeding herds.

The 1-4-4 strain of PRRS has also hit Nebraska.

Nebraska Extension educator Benny Mote opined that “we have underestimated the spread of small viruses via wind. The winds that tore through the region on December 15 last year, brought more than bad weather - PRRS infections seemed to appear in pockets following the storm.”

PRRS itself does not cause death. It is usually another issue coupled with the disease that kills, such as pneumonia. However, the virus is showing up in new places and appears to travel quickly.

The best way to treat the viruses, is to implement a biosecurity plan to prevent it from entering your herd.

The USDA forecast that the US hog breeding herd was down 6.9%. But, according to death losses of as much as 40 to 50%, the USDA may be under-reporting the losses in supplies from diseases, which means we could see more H & P surprises and much higher than expected prices.

Herd health challenges and the threat of ASF are likely to drive accelerated investment in infrastructure and changes in management. But we still need labor, which will still be a limiting factor. It will add more cost and ultimately impact the global competitiveness of US pork.

The upside of rising costs and labor constraints, however, is a general reluctance by producers to rapidly expand production, which should extend this period of profitability for the industry into 2023.

Higher hog prices have helped offset the rise in costs, and are expected to remain quite elevated in 2022 relative to historical levels.

Unfortunately, higher feed costs are here to stay.

The world may experience a short crop for multiple years - unlike in 2012 that lasted just one year - due to the 89-year drought cycle, that includes a six-year cycle of drought that began in 2020 the year of the pandemic, and is expected to end or peak in 2025.

The pandemic, global supply chain disruptions, and now the war in Ukraine are just adding more fuel to the fire to global economics, and to the pig production industry.

Maurizio "Moe" Agostino
Moe is chief commodity strategist with Farms.com Risk Management. He has over 42 years of experience in commodity risk management, the last 20 years with Farms.com Risk Management. Moe the “Marketing Man” is an expert in forecasting grains, basis, livestock, feed, futures/options, energy/ diesel, fertilizer/input purchases and both technical and fundamental analysis with a global and local market perspective.

Farms.com Risk Management Inc. is an agricultural commodity marketing and price risk management provider for North American farmers, producers and agribusiness. The goal for the Farms.com Risk Management team is to maximize producer profitability while reducing risk by providing in sight with a daily Commodity Report and a marketing app for smart phones 24/7. Visit RiskManagement.Farms.com for more information.