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World Pork Trade Overview - November 2005

by 5m Editor
28 November 2005, at 12:00am

By USDA Foreign Agricultural Service - This article provides an overview of global pork trade predictions for 2003. The report covers the US, Brazil, China and the EU.

2006: Another Year of Record Trade in Red and Poultry Meat Forecasted

Trade of beef, pork and poultry by major exporters is forecast to reach record levels in 2006 despite the instability of continued disease outbreaks and their resulting trade restrictions. While avian influenza (AI) in Asia and Russia, foot and mouth disease (FMD) in Brazil, as well as trade restrictions on U.S. and Canadian beef due to bovine spongiform encephalopathy (BSE) have undoubtedly impacted global trade and will continue to be a cause of concern, meat consumption among major consuming countries continues to climb spurring increased production and growth in exports.

For the first time in history, broiler meat exports by major traders are forecast to reach 7.5 million tons. Poultry demand is expected to be strong due to the absence of the United States in major beef markets and constraints on growth in Brazilian beef exports.

World Overview: Positive macroeconomic growth will continue to encourage investment and increase consumer demand.

World economic growth is expected to remain strong throughout 2006, albeit at the same level of 2005. The forecasted positive economic environment will promote investment in meat production and processing capacity in many major livestock and poultry producing countries. Producers and processors in rising exporting countries are investing in a range of capacity and quality improvement projects such as the modernization and construction of slaughtering plants in Brazil and feedlot expansion in South Africa.

However, there are instances in which economic growth will not be enough to support production and processing growth. In the case of the Indonesian poultry sector, outbreaks of AI, escalating energy costs, weak currency, and higher feed costs will minimize profits and constrain growth in 2006. Increases in worldwide real per capita GDP in 2006 will continue to fuel rising livestock and poultry consumption and hence production. Asian economies particularly China, Hong Kong, Taiwan, and Thailand are forecast to experience strong growth, likely fostering meat consumption as consumers will have more disposable income.

Red meat and poultry meat prices for major exporters influenced by disease related trade distortions .

During 2004 and 2005, outbreaks of AI and BSE caused trade distortions which affected major exporters’ (such as the United States and Brazil) poultry and beef prices. Consequently, major exporters’ pork prices increased in the last two years as exports mushroomed in the wake of consumers shifting their animal protein consumption.

Favorable exchange rate enables U.S. to remain price competitive.

A weak U.S. dollar has made U.S. exports of meat and poultry more competitive in world markets since 2003. Even though further depreciation of the U.S. dollar vis à vis competitor countries such as Brazil and Australia is not anticipated to continue in 2006, favorable exchange rates will give U.S. exports a competitive advantage.

FMD in Brazil will have minimal impact on current meat trade flows.

The October 2005 outbreak of FMD in Mato Grosso do Sul, Brazil will constrain growth in the Brazilian beef and pork sectors. Brazil will shift beef production to FMD-free states to meet export demand in 2006, particularly to Russia. Mato Grosso do Sul is not a major pork producing region and the impact on Brazilian pork exports is anticipated to be small. At the time these forecasts were generated, Mato Grosso do Sul was the only state with confirmed FMD cases.

Broiler meat exports to surpass beef exports by major traders.

For the first time in history, broiler meat exports by major traders are forecast to reach 7.5 million tons. Poultry demand is expected to be strong due to the absence of the United States in major beef markets and constraints on growth in Brazilian beef exports. The 2006 increase of nearly 7 percent is the result of increased trade by a number of countries including Argentina, Brazil, China , Thailand, and the United States.

Continued Strong Pork Production in 2006

Accounting for 76 percent of the major producers’ increase forecast in 2006, China will drive pork production for those countries 3 percent higher in 2006 to just over 95 million tons. China will continue to dominate as the world leader with nearly 51 million tons of pork production. Increases in pork production will occur in the European Union and Russia in 2006. Brazilian pork production will increase just over 3 percent to slightly more than 2.8 million tons in 2006 as the FMD-impacted region of Mato Grosso do Sul is not a major pork producing region.

Pork production continues to benefit from its role as a substitute for animal protein when trade in beef and poultry declines due to disease-related bans. Growth in pork production and consumption in some regions is due to substitution, while recent export growth in the other regions such as Mexico has been income driven.

Key Producers:

China:

Despite various obstacles, China’s swine production has benefited from efficiency gains due to improved breeds and feed. This is reflected by increased imports of breeding swine. Increasing percentages of sow stocks compared to total inventory will translate into continued strong swine production in 2005 and 2006. Investment in hog slaughter and pork processing has also risen. Increased foreign investment through joint ventures will continue to boost efficiency and production.

European Union:

With inventories, increasing, the 2006 pig crop is expected to increase, especially in the New Member States (NMS). In line with increased slaughter, pork production is forecast to rise approximately 1 percent in 2006 to nearly 21 million tons.

United States:

The United States market is currently signaling producers to expand production. However, hog producers seem to be holding back. Production in recent years has been export driven. While only 8 percent of U.S. pork production was exported in 2001, 13 percent of U.S. pork production is forecast to be exported in both 2005 and 2006. In 2006, U.S. pork exports are forecast to reach a high of nearly 1.3 million tons.

Global Trends and Factors in Consumption

Increases in disposable income undoubtedly augment food purchases in low and middleincome countries. Further, of these boosts in purchasing power, a higher proportion is spent on purchases of higher-value products such as meat and dairy. Thus, macroeconomic stability and growth in low and some middle-income countries results in higher consumption of red meat and poultry, providing new growth- market opportunities for domestic producers and world suppliers.

Not only are low and middle-income countries increasing their per capita consumption, they are also gradually accounting for a greater share of world consumption. China’s pork consumption accounted for only 50 percent of pork consumption in major pork consuming countries in 2001 and is forecast to account for 53 percent in 2006. Alternatively, the European Union’s share of pork consumption is forecast to decrease from 24 percent to 22 percent from 2001 to 2006.

Red meat and poultry demand in developed countries such as the United States is strong. Given the already relatively high level of consumption, per capita consumption of these products cannot be expected to gain sharply. However, demand in higher income countries is shifting to more convenient and processed products, creating opportunities for value-added meat products.

Pork: Pork consumption in the major consuming countries is expected to grow about 3 percent in 2006 and again China accounts for the largest portion (76 percent) of forecasted growth. One of the few countries in which a decline in consumption is anticipated in 2006 is Japan. While the decline in Japanese pork consumption is minor, less than 2 percent, it demonstrates the market is readjusting. In 2004, mainly due to import bans on U.S. beef due to BSE and Asian poultry due to AI, Japan experienced unusually high levels of demand for pork. As Japan adjusts to supply shocks to the beef and poultry sectors, pork consumption is forecast to return to more historic levels.

Pork Trade

Pork exports continue to benefit from beef and poultry meat supply disruptions due to AI and BSE. Increases in pork production are substituting for reduced other animal protein demand in many countries. The United States continues to benefit from strong demand and is expected to account for 25 percent of pork exports by major traders in 2006, up from 22 percent in 2001. U.S. pork exports have benefited from favorable exchange rates and the substitution of pork for beef in Asia. U.S. pork exports could reach a high of just over 1.25 million tons in 2006.

Between 2001 and 2006 increases in pork demand are expected to benefit Brazil, Canada and the European Union which have seen exports increase by 115 percent (to 725,000 tons), 51 percent (to 1.1 million tons), 28 percent (to nearly 1.5 million tons) respectively. In 2006, for the second year in a row, Canadian pork exports are forecast to exceed 1 million tons.

Key Exporters:

Brazil:

With a favorable climate, a strong domestic feed supply and inexpensive resources, Brazil is well positioned to retain its status the world’s third largest pork producer, though far behind leading countries. Brazil is extremely dependent on Russia for export sales. From January to September 2005, Russia accounted for approximately 65 percent of Brazilian pork exports. Brazilian exports to other non-traditional markets are increasing through negotiations to resolve SPS issues and aggressive market promotion. The FMD outbreak in Mato Grosso do Sul is not expected to impact Brazilian pork exports as it is not a primary pork production or exporting region.

European Union:

EU pork production is expected to marginally increase in 2006 while exports rise slightly (1 percent) in 2006 to nearly 1.5 million tons, as Polish exports to Russia are expected to resume after gaining Russian export approval. The European Union easily retains its position as the world's leading pork exporter and is forecast to account for 28 percent of pork exports by major traders and 25 percent of the increase in pork exports in 2006.

Further Information

To continue reading this report, including tables, click here (PDF)

Source: USDA Foreign Agricultural Service - November 2005