Economic impacts of PEDV

Economic impacts of PEDV

Porcine Epidemic Diarrhea Virus was first identified in the United States in April 2013, even though it has previously had an effect globally. In 29 of the contingent states, PEDV increased mortality in preweaned pigs and increased morbidity in all pigs. But how did PEDV affect the entire U.S. swine industry?

Lee Schulz, from Iowa State University, and Glynn Tonsor, from Kansas State University, recently assessed the economic impact of PEDV in the United States. Their article, in the Oct. 2 issue of the Journal of Animal Science, reviews the timeline of PEDV, the impacts on subsectors of the industry, demonstrates an economic model, and gives future considerations to the industry.

According to the Swine Health Monitoring Project, the greatest impact of PEDV was from September 2013 to August 2014 and the authors use this “year” to make comparisons. During this time frame, the number of farrowing sows was decreased by 0.25% compared to September 2012 to August 2013. Furthermore, there was a 3.0% decrease in the number of pigs saved per litter and a 3.2% decrease in the total number of head in the United States in the “year of PEDV,” compared to the previous year.

Because of lower swine numbers, the slaughter facilities also observed a 4.6% decrease in the number of pigs (or 5,201,000 fewer hogs) sent to be slaughtered. But, during the “year of PEDV,” producers fed pigs to a heavier weight and the United States observed a 3.3% increase in carcass weights.

One would expect with a major outbreak of a virus in the country, consumer demand for pork would be greatly affected. The authors state the example of “swine flu.” Even though swine flu did not have any human health risks from pork consumption, demand decreased, and therefore, had considerable negative economic impacts on the industry. However, with PEDV, demand for pork was not negatively affected. In fact, in 2014, the demand for pork increased by 7.4%. Since 1990, this was the second largest annual increase.

Furthermore, the price of pork also increased by 10.3% and per capita consumption only decreased by 0.8%. Therefore, “The price increase had been enough to more than offset the quantity reduction and allowed overall pork inflation-adjusted values to climb, which in turn increased hog prices and improved the overall economic situation of hog producers,” write Schulz and Tonsor.

The authors acknowledge that variation between each production system is different: facilities, genetics, environment, geographic location, feed rations, biosecurity, weather, etc. However, they developed a model to determine the return on investment for operations during the “year of PEDV.” Overall, the ROI as a percent per head, was increased by 26.2 in 2014 compared to 2013 for a farrow-to-finish operation. However, they also showed that if an operation was less fortunate and had lost more, they were definitely worse off.

Overall, Schulz and Tonsor suggest that packers, processors, distributors and retailers were harmed the most. Consumers were also harmed from PEDV, both directly and indirectly, from increased prices of pork, but also beef and poultry. The impact on producers was variable, and depended on the costs and losses endured. The long-term effects of PEDV are still to be realized, but because of expansion in the industry and new participants, in the future, greater efficiency “will not be greater profit for the participants in that industry but will be increased production, lower costs to the consumer and greater consumption of the products.”

Schulz and Tonsor offered final considerations for the swine industry. A price premium may be needed to “offset uncertainty and encourage the process of expanding production,” they write. The role of PEDV vaccines should be considered. As an entire industry, stricter biosecurity measures should be taken. In the future, the industry needs to be prepared to handle adverse response from consumers. Even though pork from hogs infected with PEDV is safe to eat, luckily, this time around, consumers perceptions about pork safety were minimally affected.

To read more about the economic model they developed, the impacts of PEDV on international trade, and aggregate impacts, click here.

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