A disease sweeping China’s hog farms is set to hit U.S. meat eaters’ pocketbooks.
The companies that sell Big Mac and Whopper burgers, Jimmy Dean sausages and Dunkin’ bacon sandwiches all expect meat prices to rise this year, as China imports more pork, beef and poultry to fill a shortfall in its huge hog market.
African swine fever, harmless to humans but deadly to pigs, has decimated Chinese hog counts, constraining supplies in the world’s top market for pork. Up to 200 million Chinese hogs will be lost as the disease spreads and herds are culled to prevent it from spreading further, U.S. meat-industry officials estimate. Some expect the number to rise further.
The number is much higher than the 125 million pigs slaughtered in the U.S. last year, according to U.S. Department of Agriculture data, and represents a roughly 5% hole in the global meat market. China could import 33% more pork this year than in 2018 to meet its domestic demand, the USDA said. Estimates of China’s hog losses are inexact because U.S. meat officials consider Chinese government data incomplete.
That would leave less meat in markets including the U.S., where farmers and processors produced a record 26.3 billion pounds of beef, pork and chicken last year. Eventually, executives and analysts say, consumers will pay more for meat as a result.
“It will affect all the proteins,” Tyson Foods Inc. Chief Executive Noel White said on May 15 at a conference in New York. “We’re already seeing that effect—prices are moving higher.”
Mr. White said that Tyson, the biggest U.S. meatpacker by sales, is negotiating for retailers to raise prices on its products such as Jimmy Dean sausages and Ball Park hot dogs to cover higher meat costs.
Hog futures have risen 52% this year. Wholesale meat prices are beginning to follow. Hog-carcass prices are up 23% in 2019, according to USDA data, and prices for pork trim, used in sausage, have nearly doubled.
Pam Boling, a 58-year-old photographer from Las Vegas, said she would buy less meat to serve her two sons if prices rise.
“It will force a renewed negotiation in my home on a pescatarian or vegetarian lifestyle,” Ms. Boling said.
McDonald’s Corp. , which recently added bacon to some sandwiches at no extra cost to boost traffic during select promotions, expects food commodity costs to rise as much as 3% this year, mainly because of rising pork and beef prices, Chief Financial Officer Kevin Ozan said on April 30.
Wendy’s Co. also notched up expectations for food-cost inflation this year due to expected increases in bacon prices.
While it will probably take months for the full impact of the outbreak to ripple into prices, as companies tend to lock in costs in supplier agreements, meat prices could eventually rise by more than 15%, said Jeremy Scott, an analyst with Mizuho Securities.
Some companies see rising pork prices as an advantage. Pilgrim’s Pride Corp. , the second-largest U.S. poultry processor, said this month that grocers have been calling to lock in supplies of chicken to feature in specials and ads later this year, anticipating that pork prices will climb.
Some restaurant companies said they are already paying more for other meats.
Dunkin’ Brands Group Inc. has seen meat costs rise, its chief operating officer, Scott Murphy, said in an interview. The largest Burger King franchisee in the U.S., Carrols Restaurant Group Inc., said it is paying $2.17 a pound for beef, up from $1.99 a pound on average in the first three months of this year. The company said it was contemplating a 1% average price hike at its 1,010 Burger King and 55 Popeyes Louisiana Kitchen restaurants this year to cover higher meat prices.
The parent company of Applebee’s and IHOP, Dine Brands Global Inc., said rising pork prices could make the chicken and beef the company buys more expensive down the road, Chief Executive Stephen Joyce said in an interview.
Some retailers said they see parallels between China’s swine-fever outbreak and previous livestock pandemics. In 2013 and 2014, when a hog virus killed millions of baby pigs in the U.S., retail pork prices rose 12% in the U.S., federal data shows.
Bird flu outbreaks in Europe and Asia in 2017 led to the destruction of millions of birds and upended the poultry industry. In the U.S., bird flu outbreaks in 2015 contributed to egg prices for consumers shooting up by more than a third that year, the largest percentage increase in years, federal data shows. It took about nine months for the spike to reverse.
Frans Muller, chief executive of Koninklijke Ahold Delhaize N.V., said those outbreaks pushed up prices for a staple of the Dutch supermarket chain. This year, he said he is closely monitoring swine fever’s effect on meat prices and supply.
“We don’t underestimate this at all,” Mr. Muller said in an interview.
Write to Heather Haddon at heather.haddon@wsj.com and Jacob Bunge at jacob.bunge@wsj.com
2019-05-19 12:00:00Z
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