PORK AND SWINE: 2012 FORECAST OVERVIEW

China and Korea Drive Rebound in Global Pork Production

Global pork production is forecast two per cent higher to a record 103.4 million tons. Growth is mostly attributed to recovery in South Korea and China. Modest growth is also expected from major exporters, the United States, Russia and Brazil.

South Korea is forecast up 21 per cent to 1.0 million tons as their pork industry rebuilds following the devastating foot and mouth disease (FMD) outbreak that slashed their production by 25 per cent. Record high swine and pork prices have encouraged producers to quickly rebuild despite higher compound feed prices. Sow inventories have expanded rapidly and beginning sow stocks are expected to reach 98 per cent of pre-FMD levels. Producers are expected to continue to rebuild through 2012. However, it is unlikely that total inventories at the end of 2012 will reach pre-FMD levels due to new regulations increasing minimum barn space requirements and environmental regulations. Additionally, the recently implemented Free Trade Agreement with the EU is expected to increase relative competitiveness of EU pork, which in turn is expected to put downward pressure on Korean production.

China’s production is forecast to recover four per cent to 51.3 million tons following swine disease problems and poor producer returns. The rebound is being fuelled by sharply higher prices and recent government measures such as the productive sow subsidy, although swine inventories are not expected to fully recover in 2012. Expansion in small-scale operations, which still account for a majority of production, is being constrained by higher feed costs and swine disease threats. Meanwhile, large-scale operations report some difficulties in acquiring additional land necessary for expansion.

The United States is forecast up two per cent to 10.5 million tons. Producers are expected to continue to benefit from productivity gains, with the pig crop up two per cent while beginning sow stocks have increased only slightly. Greater available supplies compared to competing proteins are expected to bolster domestic consumption.

Russia is forecast up three per cent to 2.0 million tons, supported by positive producer gains and government support and investment. Producers have expanded their breeding herds in the face of lower feed prices, less import competition due to a sharp reduction in the import quota, and the prospect of higher pork prices. Production growth is expected to come from larger operations, as smaller producers find it difficult to compete with new, modernized farms.

Japan’s production is forecast up two per cent to 1.3 million tons as producers are expected to rebuild. Greater domestic supplies are expected to mitigate import demand.

The Canadian hog industry has reached a turning point after several years of decline. Pork production is forecast up one per cent to 1.8 million tons with modest increases in beginning sow inventories and the pig crop. Relatively high feed costs and uncertainties in both pork prices and foreign demand will likely temper growth.

Brazilian pork production is forecast up two per cent, to 3.3 million tons, as domestic demand strengthens in response to industry promotions. Consumption is also expanding among the growing Brazilian middle class, as pork prices are competitive with beef.

Global Trade Constrained by Import Restrictions

Imports are forecast down four per cent to 6.0 million tons, constrained by a sharply lower Russian TRQ and reduced South Korean import demand. Other major importers are forecast nearly unchanged or in the case of Mexico and China slightly higher.

Russia’s imports are forecast to drop 25 per cent to 700,000 tons, due mostly to a 30 per cent cut in the import quota in an attempt to promote domestic production. However, out-of-quota shipments are expected to continue to be significant. Lower imports combined with modest production growth are expected to result in a decline in consumption.

South Korea’s imports are expected to fall 20 per cent to 500,000 tons, yet will remain significantly higher than 2010 pre-FMD-impacted levels. The special zero duty TRQs to facilitate imports in 2011 are not expected to continue.

Mexico’s imports are forecast up three per cent to 650,000 tons as pork is expected to be more price competitive compared with other meats. Additionally, the expected reduction of Mexican retaliatory tariffs on hams and shoulders are expected to make US pork more competitive.

China’s imports are forecast two per cent higher to 560,000 tons as expanding domestic supplies are unable to meet rising demand.

Japan’s imports are expected to remain flat at 1.2 million tons as greater domestic supplies limit import growth.

US exports are forecast up three per cent to 2.3 million tons with larger shipments to China and Mexico expected to outweigh reduced demand from South Korea and Russia. Exports are increasingly important to the US pork industry, accounting for 22 per cent of production.

EU exports are forecast down five per cent to 1.9 million tons, largely on tighter supplies as well as weaker demand by some key importers. Lower shipments are expected to Russia due to lower import quotas, and South Korea where domestic supplies are recovering.

Brazil’s exports are forecast down two per cent to 570,000 tons as Russia continues to ban imports from three major pork-producing states. However, Brazil is expected to expand exports to Hong Kong, Argentina and other markets.

Canada is unchanged at 1.2 million tons as a relatively strong Canadian dollar and limited supplies are expected to constrain its competitive position.

Further Reading

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