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Get ready to pay higher prices for pork

The price of pork is expected to surge 10 to 15 percent this summer because because a viral epidemic is killing millions of young pigs and reducing supply.

Porcine epidemic diarrhea virus first appeared last April and has spread to 27 states, according to data from the American Association of Swine Veterinarians. Some 274 cases were reported last week alone.

Steve Meyer, an economic consultant with the National Council of Pork Producers, doesn't remember a time when pork prices rose so steeply. The industry is worried that the price increases will encourage consumers to turn to other proteins, such as chicken.

"We know that we are going to have some losses," he said. "That's a major concern."

Wholesale prices surged 5.8 percent in January, while retail pork chop prices were $3.47 per pound, a gain of 7.4 percent over last year, according to the Bureau of Labor Statistics. U.S. Department of Agriculture data cited by Bloomberg forecasts that consumers will pay 3 percent more for pork this year.

According to Meyer, the U.S. lost about 1.3 million pigs in January to the virus, or about 12 percent of the pigs that were to be slaughtered in July. February's figures equaled 15 percent of animals that would have gone to processors.

"It's been devastating" to producers, he said.

The virus, which is thought to have originated in China, doesn't pose a threat to human health or other animals. For young pigs, however, it is 100 percent fatal.

Tyson Foods (TSN), the second-largest pork producer; Hormel (HRL), the producer of Spam; and Smithfield Foods are among the processors that will be affected by the rising prices. Pizza chains such as Domino's (DPZ) and Papa John's (PZZA) also will have to deal with rising pork prices, as will fast-food operators such as McDonald's (MCD), which count on products like bacon and ham to attract diners for breakfast, the industry's fastest-growing segment.

Restaurant chains, which have been hurt by this winter's brutally cold weather in many parts of the country, will try to absorb these costs by, among other things, cutting back on their use of pork products, said Harry Balzer, NPD Group's chief industry analyst. They also may promote other meats.

"The winter weather has been horrible for the restaurants," Balzer said. "Right now they are just trying to get people to come in the door."

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