Pork Industry Overview, February 2003: Canada and Brazil
By USDA, Foreign Agricultural Service - This article provides a summary of pork industry data from the USDA FAS Livestock and Products Semi-Annual 2003 reports for Canada and Brazil. Links to the full reports are also provided. The full reports include all the tabular data which we have omited from the summaries.Canada - Hogs and Pork |
Canada’s hog inventory reached a record level in 2002 and hog numbers are forecast to continue
to grow in 2003 driven by domestic processor demand to satisfy increasing pork exports and by
increasing live feeder hog exports to the United States. For 2003, the pig crop has the potential
to exceed 30 million head, more than 20% greater than five years ago.
Hog Prices
Weak prices prevailed throughout most of 2002 for Canadian hog producers. The pork sector
faces prospects of higher feed costs until at least the fall of 2003. Improved profitability is
expected throughout 2003 as a result of higher North American hog market price projections.
Some analysts project a significant advance in Canadian hog prices in 2003 in a range between
10-15% above last year.
Live Hog Exports
Live hog exports to the United States reached an estimated 5.8 million head during 2002, a
record level. For 2003, slaughter hog exports to the United States are expected to decline
moderately reflecting increased Canadian slaughter capacity and growing Canadian pork exports.
Although the U.S. Country of Origin Labeling Regulations have added some uncertainty into the
future marketing of Canadian feeder pigs to the United States, most industry analysts expect total
live hog export volumes to remain substantial during 2003, in the 5.6-6.2 million head range.
Pork Trade
Exports
Canadian pork exports increased an estimated 15% in 2002 to 835,000 metric tons (cwe). Post
projects a lower rate of increase for 2003 with total exports projected at 875,000 metric tons.
The United States is the major market for Canadian pork accounting for about 60% of total
exports. Japan, Australia, Russia, South Korea and Mexico are the other main export market
destinations.
Imports
In the January-November period of 2002, U.S. pork exports to Canada ran almost 5% above the
level for the corresponding period of 2001 and accounted for more than 97% of total Canadian
pork imports.
Policy Update
Mexican Anti-Dumping Action Against U.S. Pork
Mexico’s Secretariat of Economy announced in January the initiation of an official
antidumping investigation against U.S. pork classified in tariff codes 0203.11.01,
0203.12.01, 0203.19.99, 0203.21.01, 0203.22.01 and 0203.29.99. The investigation is in
response to a petition submitted by the Mexican Pork Council (CMP).
The action could have
implications for Canada. Canadian hog industry officials are concerned over the potential affect
that a future Mexican duty may have on U.S. hog market prices (and U.S. pork supplies) which
would be immediately felt in Canadian hog markets. At this juncture, industry observers do not
believe that an imposition of a Mexican duty would result in a sudden surge in Canadian pork
exports to Mexico, presently the number six market for Canadian pork exports.
Country of Origin Labeling
Martin Rice, Exec. Director of the Canadian Pork Council told delegates to a Toronto conference
on trade and border issues in late 2002 that the U.S. COOL regulations will impose huge costs on
the North American livestock and meat sector.
While the expectation of the introduction of U.S.
country of origin regulations initially sent a chill through the Canadian hog industry, Rice said
that since the publication of the COOL voluntary guidelines his industry is studying whether
Canadian pork could gain a premium in the U.S. market. He claimed that the industry has had
discussions with major U.S. packers on the feasibility of devoting special times for the slaughter
of Canadian origin hogs to simplify auditing and identification requirements.
Rice believed that
the additional costs of COOL would be passed down through the supply chain and result in lower
producer prices for hogs throughout North America. He said the Canadian Pork Council was
disturbed that the COOL regulation sends a signal to other countries to look for means to
discourage imports. Rice said that the policy of the consumers right to know can be taken too
far. He believes that the COOL regulation weakens the U.S. and the Canada position on GM
labeling. Rice noted that the National Pork Producers Council is on record as opposing COOL.
A report commissioned by the Manitoba Pork Council to study the impact of U.S. Country-Of-
Origin-Labeling (COOL) on Canada’s hog industry concludes that at best, Canadian hog packers
will benefit because pork will trade with the U.S., but hogs won’t and Canadian pork may be able
to command a premium. At worst, Canada will either lose a substantial export market or retain it
only at a significant price discount. Based on it’s research, the George Morris Centre, an
agricultural think tank, identified alternative scenarios under COOL and estimated their
economic consequences.
In the negative scenario, it estimates the possibility that the Canadian
hog and pork industry could lose over 450 hog farms and farm income totaling over C$350
million; Canadian feed mills would close; a market for 250,000 acres of cropland would be lost;
Including grain farms, losses could be up to C$750 million in farm income and losses of over
3,000 farms.
From a Canadian perspective, the Centre believes certain actions can maximize the
probability of having the best possible outcome, including:
- expanding hog finishing capacity in Canada;
- accessing and training the labor required for packers to move to two shifts; promoting Canadian Brands in the U.S. or Asian countries;
- replacing U.S. product in either the domestic or export market, preferably at premium prices.
Environmental Issues and Challenges
Environmental issues and concerns have slowed hog expansion in Canada. In early 2002, the provincial government in Quebec imposed a temporary moratorium on hog barn expansions, seeCA2060, later extended until mid-2004.
On Ontario, the provincial government is developing
controversial nutrient management regulations that will apply to large, intensive livestock
operations and according to some industry analysts, no large scale hog operations can be
proposed anywhere in Canada without attracting local opposition and costly regulatory delays.
The issue recently resulted in the Taiwan Sugar Co. abandoning its plan to build what would
have been Canada's biggest hog production operation near Edmonton, Alberta. The Alberta
Court of Appeal overturned approvals earlier granted to the company by the County of Flagstaff,
cite of two of the proposed five locations.
A well-organized and financed local opposition group
carried the case to appeal incurring C$100,000 in legal fees. The operation would have
represented an investment of C$41 million with capacity for 80,000 sows, which reportedly
would have been Canada’s largest single hog production facility.
To view the PDF report and tables (ideal for printing) Click Here (new browser)
Brazil - Commodity Outlook, Pork |
Production
Pork production increased by a surprising rate of 15 percent in 2002 and reached 2.5 million metric tons, in response
to exceptional performance of the export sector and firm domestic demand for processed pork products. However,
the increase in production was followed by a period of high feed costs, because of higher corn prices, and relatively low
producer prices.
Although pork production continues to expand in the center-west regions of the country, most of the
increase in pork production in 2002 originated from the three southern states of Brazil, where the largest pork packers
and exporters are located. According to our trade sources, these states accounted for 60 percent of Brazil’s pork
production in 2002.
Post also revised the outlook for pork production in 2003. Pork production is expected to increase this year, but at
moderate rates. However, pork producers also may cut production in 2003 if there is a drop in the second corn crop
and if packers fail to meet their export goals.
Trade
Although final data is not yet available, our trade sources indicated that pork exports increased by 75 percent in 2002
to 454,000 metric tons, or 590,000 mt in carcass weight equivalent (CWE). This is an-all time record in exports, and
results from two factors: a) a significant devaluation of the Brazilian currency last year of approximately 53 percent; and,
b) significant increase in pork exports to Russia (363,394 metric tons, or 472,412 mt - CWE). The total export value
increased by 34 percent to US$482 million, but the average export price was down by 25 percent to US$1,012 per
metric ton.
Russia accounted for 80 percent of Brazil’s pork exports in 2002. The high concentration of pork exports to Russia is a
major concern to Brazilian producers. Russian officials have established an import quota for Brazil of 450,000 MT
with a 15 percent import duty (beyond this volume, duties would increase to 80 percent). Also, Russian officials have
not yet suspended their embargo of pork from the state of Santa Catarina imposed last year due to the outbreak of
"Aujeszky" disease.
According to trade sources, more than 80,000 animals have been killed due to this disease, which
is prevalent in some counties of Santa Catarina. Brazilian officials are expecting a Russian Veterinarian Team to visit
Brazil in February or March to investigate the situation in Santa Catarina. Brazilian pork exporters also expect to
discuss the Russian meat import quota issue during the visit.
Hong Kong and Argentina were the two largest markets for Brazilian pork, despite reduced imports from Brazil in
2002. This has prompted Brazilian pork exporters to look for new markets, such as Japan, the European Union, China,
and South Africa.
Policy
The swine sector (producers and packers) have requested from the Brazilian government the following policy initiatives to improve the "financial" situation of hog producers due to over production, lower prices, and higher feed costs:
- intervene as a moderator in the sector with the goal of adjusting supply and demand;
- control stocks and supply of corn, including suspension of corn exports in 2003;
- allocate more subsidized rural credit for hog producers to finance their production costs;
- increase funds to the animal health sector to maintain the current "sanitary" status as free of major diseases;
- negotiate with the Russian government to open the market for pork from Santa Catarina;
- allocate funds to support the industry market promotion efforts to increase the domestic consumption of fresh pork, since 80 percent of domestic consumption of pork in Brazil is made of processed products; and,
- to continue to support the market promotion program for pork in export markets.
List of Articles in this series
Pork Industry Overview, March 2003: Russian Federation
Pork Industry Overview, February 2003: Canada and Brazil
Pork Industry Overview, February 2003: Korea, Hong Kong, Japan and China
Pork Industry Overview, February 2003: Netherlands and Poland
Pork Industry Overview, February 2003: Australia
Pork Industry Overview, February 2003: European Union
Source: USDA, FAS - International Agricultural Trade Report - February 2003