If the United States broke with African swine fever and foot and mouth disease, the cumulative impact on the pork and beef sectors over 10 years ranges from $79.5 billion for ASF alone to $231 billion for an ASF-FMD dual outbreak. According to Iowa State University Economist Dermot Hayes, losses would average between $7.5 billion (ASF scenario) and $23.1 billion (ASF-FMD scenario) per year.
"Exports would be lost and some of the product that might have gone to China would be rendered, making it very useless or losing a lot of value. But a lot of the muscle meat would end up on the domestic market, flooding U.S. pork retail consumers to try and get them to compensate, to consume 25% or 30% more pork and that takes a huge drop in prices," Hayes says.
Depending on the scenario, pork prices could fall between 50% and 60%, according to a recent report Hayes co-authored with Miguel Carriquiry and Amani Elobeid.
Funded by Pork Checkoff, the study "National Impacts of a Domestic Outbreak of Foot and Mouth Disease and African Swine Fever in the United States" first establishes a baseline or status quo scenario and then analyzes the impact of an animal disease on pork (ASF) and on beef and pork (ASF-FMD). In both cases, a worst-case scenario is assumed by eliminating all U.S. exports of the affected meat product for 10 years.
- ASF Scenario: Elimination of all U.S. pork net exports (no exports or imports) due to the outbreak of ASF. Pork imports are restricted because U.S. pork prices would be so low that countries that export to the United States would find markets elsewhere.
- ASF-FMD Scenario: Elimination of all U.S. pork net exports (no exports or imports) due to the outbreak of ASF as well as the elimination of beef exports due to an FMD outbreak (no exports while imports are exogenously held at baseline levels).
- ASF-FMD50 Scenario: Elimination of all U.S. pork net exports (no exports or imports) due to the outbreak of ASF as well as elimination of beef exports due to FMD with imports exogenously kept at 50% of baseline levels to reflect that lower domestic prices will make imports unattractive. The rationale for this scenario is that the United States would likely still continue to import certain types of beef.
No matter the scenario, Hayes says economic recovery will come down to how quickly the United States can get back into export markets.
"We ran the study with two years of lost export market as we'd be back in exports after year three, and we ran it in a worst-case scenario where it ends up in feral swine and we can never get rid of it. And that's the scary one because we've got to downsize a huge industry and we calculate it as many as 60,000 jobs would be lost in that event," Hayes says. "In almost every year, the industry is either losing revenue because prices are low, that's the first couple of years or because, we're selling less hogs later on as the industry downsizes. Average losses per year is about $8 billion."
While the impact of an ASF outbreak to the beef industry would be very small in terms of beef prices and production, beef prices would fall more than 50% in the first projection year in the ASF-FMD scenario and stay below baseline levels for three years.
The study also examined the impact on poultry, corn and soybeans. Hayes says the U.S. poultry industry could be impacted two different ways: the availability of inexpensive pork and beef will drive U.S. poultry prices down and importing countries will take more poultry rather than pork or beef. Results show that first effect will dominate and revenues in the U.S. poultry will fall between $0.9 billion and $1.7 billion depending on the scenario.
"If you flood the domestic market with pork, beef and chicken sales are going to fall and their revenues go down by 3 to 5%," Hayes says.
The decline in corn prices average -0.6% in the ASF scenario and about 1% in both the ASF-FMD scenario and the ASF-FMD scenario with beef imports at 50% of baseline levels. The impact on soybean prices is smaller with prices declining by an average of between 0.4% and 0.5% over the 10-year projection period.
"Curiously, at least against my better expectation, the grain industry is not that much impacted, and that's because we're not impacting the number of worldwide protein consumers," Hayes says. "People in other countries switch to either chickens or pork fed on U.S. corn and soybeans. That's where our exports increase, so we'd sell less corn and soybeans domestically, but we'd export more or we'd export more chicken and more beef. It's not about the grain sector, even though there is about a 1% reduction in revenue. It's all about the livestock sector."
Regardless of ASF alone or an ASF/FMD combination outbreak, the first couple of years will be a financial disaster for the U.S. pork industry, Hayes says.
"The key to saving the industry is to get back into export markets as quickly as possible, so that's why we ran a 10-year scenario and a two-year scenario. In the two-year scenario, we do not shut down the vet clinics or empty the finishing barns. What we do is we survive just as we've often done with a two-year hog cycle," Hayes says. "We get back into those export markets and we avoid the job losses and the rural economic losses associated with downsizing a huge industry. So, it's all about getting back into export markets, which in turn is about getting countries to regionalize this, which in turn depends on traceability."
For more coverage on this study as well as the traceability efforts National Pork Board and U.S. pork producers are taking through AgView, be sure to register for National Hog Farmer's fifth annual Global Hog Industry Virtual Conference. The conference will be held Wednesday May 24 and will feature a session on the economic impact of ASF/FMD in the United States as well as AgView user-led updates.