The next year will be shadowed by volatility in the animal protein market, influenced by variables such as weather conditions, geopolitical factors, health risks, and dynamics of the population's purchasing power. Trade barriers persist as a pressing challenge for the export sector, given the low predictability environment. Global growth in pork production, which had been on the rise, will face an interruption in 2024. This trend reflects the expectation of a reduction in supply from the world's three largest producers: China (-0.5%), EU (-3.0%), and US (-0.6%). Contrary to this trend, Brazil, as the fourth-largest producer, projects an increase in production of 3.5% in the same period. The persistence of African Swine Fever (ASF) as a central health concern for the sector is highlighted, despite advances in vaccine development. To date, no vaccine has achieved sufficient commercial efficacy. In China, intense growth in production since 2021, weak local demand, has kept live hog prices below year-ago levels in the first three quarters of 2023. Chinese imports are projected to increase between 8% and 10% in 2024, driven by the recovery in domestic consumption and gradual reduction in national pork stocks.
In the EU, the decline in pork production for the third consecutive year is expected to slow down in 2024 (-3% YoY). This is a result of improved margins for pig farmers, driven by the strong recovery in live pig prices and reduced feed costs. However, challenges persist due to increasing external competition, especially from the Brazilian market, and increasing environmental and animal welfare requirements. Health issues, including ASF and PRRS, will continue to shape the EU market in 2024.
In the United States, the projection is for a slight contraction in the sow herd in 2024, as a result of the significant drops in margins recorded in the previous year. High costs related to the creation and loss of processing capacity in smaller-scale slaughterhouses contribute to this scenario. Despite expectations of a reduction in feed prices, production costs are expected to remain high, putting pressure on margins until supply is more balanced with demand.
In the Brazilian market, the devaluation of food costs, recovery in exports, and robust domestic demand improved production margins, especially from the second quarter onwards. The movement to discard matrices, which slowed down compared to the previous year, contributed to sustaining supply. For 2024, the expectation is for a record grain harvest, maintaining high supply levels in the domestic market and supporting feed prices. The prices of this input, representing between 70% and 80% of production costs, are under scrutiny, with special attention to climate issues related to El Niño, which has negatively impacted the soybean planting window in the South region.
Brazil confirmed an outbreak of Classical Swine Fever (CSF) in Piauí state, North of the country, on December 1. Suspicions, reported on Nov-23, were confirmed after tests at the Federal Agricultural Laboratory of Minas Gerais. The affected property in Cocal de Telha underwent culling, and investigations are ongoing to identify epidemiological links. The World Organization for Animal Health (WOAH) was notified, and Brazil maintains a CSF-free zone covering over 95% of its pig industry. The recognized area employs natural barriers and checkpoints, along with continuous surveillance and risk mitigation measures..
In terms of exports, the Chinese market continues to be the largest destination, representing 35% of total exports. Even with a slight drop in volume, Brazil became the largest exporter of this protein to China, with a 26% share of the total imported by the Asian market. Expectations of competitive prices in the foreign market and the increase in Chinese demand represent significant challenges for the domestic market, which will face competition not only due to prices but also due to the strong cultural appeal of pork for a considerable portion of the population.
Rabobank anticipates a 3% to 4% rise in supply in 2024, propelled by increased per capita consumption and a projected 3% to 5% recovery in export volumes compared to 2023.