Impact Economic consequences of ASF in US

by Editor fleischwirtschaft.com
Tuesday, April 14, 2020
Results indicate the costs associated with an ASF outbreak are significant and require risk mitigation and safeguards to protect against the importation of the disease.
Photo: Imago Images / allefarben-foto
Results indicate the costs associated with an ASF outbreak are significant and require risk mitigation and safeguards to protect against the importation of the disease.

What are the economic consequences of African swine fever (ASF) being introduced into the United States domestic or feral pig population? A new economic modeling study conducted by a team of agricultural economists at Iowa State University and the Universidad de la Republica, Uruguay, estimated the economic impact of a hypothetical ASF outbreak by examining the elimination of pork export markets.

Export sales of US pork were at an all-time high in 2019 at $6.95 bn. (5.89 bn. pounds). Pork exports accounted for 26.9% of total 2019 US pork production. The export value returns an average $53.51 per head back to producers.

US Department of Agriculture’s (USDA) risk assessment of the likelihood of a US outbreak through legal importation of live pigs is low, and for swine products and byproducts it is moderate. The likelihood of the disease entering the US through illegal entry of swine products and byproducts is HIGH and low for illegal entry of live pigs.

Two scenarios are predicted

The study first established a baseline scenario, which represents the status quo (no ASF disease exists). Two scenarios are compared to the baseline to estimate the impact of industry downsizing on the US economy: The Two-year scenario – assumes the US quickly gets the disease under control and reenters export markets within two years  and the All-years scenario – assumes the disease spreads to feral swine and the US is unable to eliminate the disease over the 10-year projection period; thus, exports never resume.

Short-term impacts

• Exports – immediate closure of international export markets to US pork. Even ASF-positive countries prohibit the importation of pork from countries with the disease 

• Prices – US live hog prices see an immediate drop of 40% to 50%. The price reduction will help clear the surplus of pork intended for export   

• Protein prices – oversupply of meat on the domestic market leads to price reductions throughout the value chain

• Feed prices – lower demand for feed grain will reduce prices

Long-term impacts

• Revenue losses – lower prices and quantities sold lead to a decline in pork industries revenues: Two-year scenario – $15 bn. in losses ; All-years scenario – $50 bn. in losses

• Employment: Two-year scenario – minimal job losses at the end of 10 year; All-years scenario – 140,000 job losses at the end of 10 years; 22,000 lost jobs are in Iowa

• Swine industry downsizing: Two-year scenario – significant losses, but exports resume before downsizing occurs; All-years scenario – industry reduction after about five years and remains at a lower output for the remaining years

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(Bild: Imago Images / Imagebroker)

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Implications for the industry

In the all-years scenario, hog prices fall by about 47% in the first year of the outbreak; however, prices eventually stabilize and are 1.8% lower than the baseline by the end of the 10-year projection period because pork exports continue to remain at zero ($0).  In the two-year scenario, hog prices initially decline by 47% and then start to climb back to baseline levels as soon as pork exports start to recover.

In the all-years scenario, pork production declines by almost 30% even as margins return to baseline levels. The two-year scenario shows a very small contraction in the industry over the long term, given exports eventually return to normal levels.

Comparing revenues between the baseline and the two scenarios shows a dramatic decline in the first few years. Revenues begin to rise in the two-year scenario but reach baseline levels only in the last three years of the projection period. In the all-years scenario, they remain well below the baseline and never recover.

Results indicate the costs associated with an ASF outbreak are significant and require risk mitigation and safeguards to protect against the importation of the disease. If there is an outbreak, it will be critical to stop the spread of ASF quickly. This would allow the industry to regain export markets before downsizing occurs, thus saving up to $35 bn. in losses.

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(Bild: Imago Images / Werner Schmitt)

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