The Changing US Pork Industry and Implications for Future Growth

By Informa Economics, Inc - In the past 25 years, the US pork industry has undergone a dramatic transformation in response to pressures to compete, both in the domestic market against competing proteins and in the export market against the pork industries of other countries.

2 February 2006

5 minute read

Although the process of restructuring is ongoing, and the merits of this industry restructuring are still debated in some quarters, the net result is that the US pork industry has held its ground domestically and has made major inroads in export markets. The United States has generally strengthened its position as one of the most competitive pork industries in the world, but the industry still faces challenges both from other meats and against competing nations such as Canada and Brazil.

Pork Markets

US domestic pork disappearance (i.e. total consumption) hit an historic low in 1982 but has since trended higher (Figure 1), reflecting fairly stable per capita consumption coupled with US population growth. Over the same period, domestic pork production has increased at an even faster rate, (interrupted only by the normal fluctuations of the US hog cycle) allowing the United States to become a net exporter of pork products and one of the preeminent suppliers on world markets.

Over the past several decades, US meat consumption (beef, pork and poultry combined) has shown steady growth, from about 150 lbs per capita in 1960 to nearly 225 lbs per capita in 2004 (Figure 2). This reflects both US income growth and improved production techniques that have generally resulted in lower unit prices and improved quality characteristics. But domestic consumption of pork has been remarkably stable over the same period, mostly remaining between 50 lbs and 60 lbs per capita, but closer to 50 lbs per capita since about 1982. On the other hand, per capita beef and chicken consumption have trended in opposite directions, with strong growth in poultry offsetting steady, slow erosion in beef consumption over most of the same period.

And, price changes alone cannot explain most of these consumption trends, as beef consumption has trended lower despite steady or modestly declining real prices of beef over much of this period, while consumption of chicken has shown almost consistent year-over-year increases regardless of price fluctuations. Hence, other factors such as health perceptions, quality and consistency, convenience of preparation, and marketing/branding strategies have contributed to changing consumption patterns among major meat groups. Pork demand has shown remarkable stability against these market dynamics.

Historic consumption patterns indicate that the US consumer is willing to consume up to about 53 lbs of pork per capita within the current price range, so expanding demand beyond that level is mostly uncharted territory. This suggests that continued industry growth is likely to come mostly through domestic population growth and exports, along with some “targeted” growth in niche markets that appeal to particular consumer interests, such as perhaps, organic production, heirloom genetics, or production systems that emphasize specific traits such as antibiotic free, animal welfare concerns, or others.

The ability to expand exports has been one of the pork industry’s greatest success stories, and export growth occurred alongside a period of rapid industry restructuring that is still underway. Only in 1992, after the process of industry restructuring was well established, did US pork exports exceed 2% of output for the first time in our era. Between 1994 and 1998 the volume of exports tripled, as new plants using new genetics made rapid inroads into the Japanese market in particular. 1995 was a watershed year, with US pork exports exceeding imports for the first time since at least 1980 and probably back to WWII.

Since that time, the US pork industry has maintained its status as a net pork exporter. Following a sideways trend in exports in 1999 and 2000, trade shot higher again the next four years, with exports reaching 10% of pork production in 2004 and likely to finish above 12% of output for 2005 (Figure 4). From 1990 to 2004, the US pork industry has maintained a trend of increasing annual pork exports for 14 consecutive years, with 2005 expected to continue this trend. More than any other single factor, this trend provides strong evidence of the global competitiveness of the US pork industry.