Overview

The Australian pig industry has experienced considerable competition from imports in the domestic processed pig meat sector. Under Australia’s quarantine arrangements, all imported frozen pig meat must be processed (mostly into bacon and ham). Over the 10 years to 2010–11, pig meat imports as a share of total domestic pig meat consumption grew from 15 per cent to 48 per cent. Over the medium-term, competition from imports in the processed pig meat sector is projected to increase. As a result, Australian producers are expected to continue focusing their efforts on producing meat mainly for the fresh meat market.

The weighted average Australian over-the-hooks price of pigs is forecast to fall by two per cent in 2012–13 to around 275 cents a kilogram. Lower forecast prices of feed grains, which account for about 55 per cent of total production costs, are expected to support higher domestic production in 2012–13. While weighted average prices have fallen since their peak in 2007–08, lower feed grain costs have since resulted in an increase in the pig-to-feed price ratio, providing support for returns to Australian pig producers.

Over the medium term, the weighted average over-the-hooks price of pigs is projected to fall to around 265 cents a kilogram (in 2011–12 dollars) by 2016–17. This reflects a projected increase in domestic fresh pig meat production, continued productivity improvements and the effect of increased competition with imported processed pig meat. With the Australian dollar assumed to remain relatively strong over the medium term, demand for imported processed pig meat is projected to rise.

Production for the Fresh Market to Rise

Australian pig meat production is forecast to increase by one per cent in 2012–13 to around 352,000 tonnes. Over the medium term, pig meat production is projected to increase gradually to 370,000 tonnes by 2016–17, partly as a result of projected lower feed grain costs and increased demand for pig meat.

The composition of domestic pig meat production is projected to change over the medium-term. According to Australian Pork Limited, fresh pig meat accounts for around 40 per cent of pig meat consumption in Australia. Over the medium term, domestic production of fresh pig meat is projected to increase to 315,000 tonnes by 2016–17, compared with 273,000 tonnes in 2010–11. Greater industry emphasis on the fresh market is expected to lead to a slight decline in average slaughter weights, as more young pigs are turned off.

Processed pig meat accounts for the remaining 60 per cent of pig meat consumption in Australia. Given the increasing emphasis on the fresh pig meat market, the proportion of domestic processed pig meat production relative to total domestic pig meat production has fallen – from 37 per cent in 2003–04 to 20 per cent in 2010–11. By 2016–17, this share is projected to decline further to around 15 per cent, as a result of strong import competition. This represents about a 20 per cent fall in production of Australian processed pig meat over the medium term from 69,000 tonnes (carcass weight equivalent) in 2010–11 to around 55,000 tonnes by 2016–17.

Australian pig meat consumption was rising by an average of around two per cent a year in the 1990s and early 2000s. However, growth in pig meat consumption has slowed in the past five years, with per–person consumption reaching around 25kg a year. Over the medium term, relatively higher projected retail prices for red meats, namely beef and sheep meat, are expected to support pig meat consumption. Per–person consumption of pig meat is projected to rise slightly to 25.6kg by 2016–17.

Imports Continue to Grow

Australian pig meat imports have grown steadily over the past 10 years, from 26,000 tonnes in 2000–01 to 132,000 tonnes in 2010–11 (shipped weight). In 2012–13, imports are forecast to increase by four per cent to 143,000 tonnes, up from 138,000 tonnes in 2011–12. Over the medium term, pig meat imports are projected to increase further, reaching 164,000 tonnes by 2016–17.

In 2010–11, pig meat imports fell eight per cent compared with the previous year. Coinciding with this reduction in Australian imports was an outbreak of foot and mouth disease in the Republic of Korea in late 2010, which led to the culling of more than a million pigs. Subsequently, Korean demand for imported pig meat rose strongly and imports from the United States, Canada and Denmark (Australia’s three largest suppliers) increased by 35 per cent. Although the United States was able to increase pig meat exports to Australia, exports from Canada and Denmark to Australia fell by 25 per cent and 18 per cent, respectively.

Export Growth to Slow over the Medium Term

Australian pig meat exports are forecast to increase by two per cent in 2012–13 to around 32,500 tonnes (shipped weight), compared with 32,000 tonnes in 2011–12. Singapore, Papua New Guinea and New Zealand are expected to remain Australia’s largest markets for pig meat, accounting for around two-thirds of total shipments. Over the medium-term, Australian pig meat exports are projected to remain around 15 per cent of domestic production (on a carcass weight equivalent basis), reaching about 36,000 tonnes by 2016–17.

Further Reading

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March 2012