W22: Pork Update

In W22 in the pork landscape, US meatpackers and producers report that the US pork industry is grappling with an oversupply situation after years of rapid expansion as demand slows, costs rise, and new regulations loom. However, to date, pork oversupply in the US market is yet to result in lower prices for consumers. Iowa State University estimates that US pork producers faced the worst financial start of the year in more than two decades. In 2020, US pork exports hit a record 3.31MMT but dropped 10% YoY in 2022 as China began to rebuild its herd following the 2018 African Swine Fever (ASF) outbreak. With fewer US pork shipments, there is a larger surplus available for US domestic consumption where demand has stagnated. As a result, US pork wholesale prices in April 2023 fell below USD 1.50 per pound. Meanwhile, since early 2022, the US pork retail price hovered around USD 5 per pound, too high to attract more consumers. Experts expect pork retail prices to start declining in the coming weeks, and thus more consumers are likely to switch to pork due to rising beef prices. US pork producers are also facing challenges due to a recent Supreme Court decision upholding a California law, setting animal welfare standards for pork sold in the state. Rabobank warns that compliance costs related to that law, coupled with the challenging market, will drive some smaller producers out of business.

In the first four months of 2023, pork exports from Santa Catarina in Brazil reached 206.7K MT, valued at USD 504.2M, up 13.5% in volume and 27.8% in value compared to the same period in 2022. The Brazilian pork shipments were mainly destined for China and Hong Kong, accounting for 49.4% of shipments in the period. According to experts, the growth in pork exports to China can be attributed to fluctuations in prices in the Asian country and new outbreaks of swine fever, which affected domestic production. CEPEA indicates that, in the interior of São Paulo in Brazil, the average daily price of live hogs continues to show small drops within what has already become routine in May. The decrease is due to slaughterhouses, faced with low turnover in the retail trade, showing little willingness for larger acquisitions. The average daily live hog price stood at USD 17.93 per arroba, down 10.9% MoM but an increase of 8.3% YoY. Also, SuiSite outlines that the average price of live hog in the interior of São Paulo in Brazil in May 2023 was slightly below USD 20.30 per arroba, up 0.8% MoM and 6.6% YoY, but down 2.4% over the same period in 2021. The average price of French pork in April 2023 at the entrance to the slaughterhouses rose to USD 2.70/kg of a carcass, up 35.4% YoY and 54.7% compared to the 2018/22 average, a continuous increase for a year and a half. This is attributed to the drop in EU pork supply and the increase in production costs, leading to a decrease of 4.9% YoY in the French sow herd.

The current Austrian pig supply does not meet the demand, the lowest in two decades. The main problems for Austrian farmers are high piglet prices and environmental regulations. The assortment of fattening pigs at the domestic pig market was about 80% and sold out quickly. The Pentecost weekend festivities likely caused stocks in the meat industry to decrease. Against this background, buyers had to take into account the price demanded by farmers and increased the price of fattening pigs to USD 2.62/kg slaughter weight. The piglet price is still at USD 4.18/kg. Lastly, in Q1 2023, UK pig meat exports (including offal) totaled 78.5K MT, down 21% YoY, the lowest shipment in 5 years, with February (-13%) and March (-24%) significantly behind the 5-year average. This is due to tight domestic supplies as a result of the severe market conditions of the past two years. UK fresh and frozen pork shipments in the first three months of 2023 totaled 34.7K MT, down 39% YoY, and a contraction of market share from 5 years ago level of 66% to 44% in 2023. UK pork shipments to all major destinations were down YoY, with exports to the EU dropping 10.9K MT, the Philippines declining 4.6K MT, and Chile cutting 2.1K MT. HMRC data indicates that, in the 52 weeks ending May 14th, volumes of pork purchased in the UK retail market fell by 3%, due to high inflation that led to weakened domestic demand. As a result, UK pig meat imports in Q1 2023 reached 185.6K MT, down 17% YoY, and 10% below the 5-year average, with all key product categories recording declines so far in 2023.