W24: Pork Update

In W24 in the pork landscape, in the past decade, the EU's pork industry has been hit by the Russian trade embargo, the spread of African swine fever (ASF) to the West, and the COVID-19 pandemic. After recovering from these crises, propelled by high Chinese demand, the pressure on EU producers seems to have intensified. Farmers fear that overhaul of EU livestock regulations will phase out farms and extend industrial pollution limits to more farms, cost billions, and take EU pork out of exports and the domestic market. The possible effects of the changes to be finalized in 2024 are unclear, as EU states debate with the European Commission (EC), which seeks to achieve sustainability goals. Research estimates that the rapid elimination of hog barns will cut pork production by nearly a quarter by 2025 and raise prices by almost half. Whatever the final regulations, experts expect the industry to reflect a society focused on animal welfare and environmental protection. Germany's pork sector has already shrunk and been hurt by an outbreak of African swine fever (ASF), which has curbed exports from 2020 as key markets such as China and Japan shut their doors. Pork production in German slaughterhouses fell by almost 10% in 2022.

In the first 22 weeks of 2023, Dutch piglet exports to Spain totaled nearly 860 thousand heads, up 13% compared to the same period in 2022. Germany remains the largest importer of Dutch piglets, although exports are declining. In 2021, more than 1.64 million piglets from the Netherlands went to German fattening pig farmers. In the same 22 weeks in 2022, there were significantly fewer at 1.22 million. In the first 22 weeks of 2023, German imports of Dutch piglets amounted to 1.2 million heads, down 1.6% YoY, a further decline in exports to Germany. After Germany and Spain, Belgium is the most important buyer of Dutch piglets. However, sales to Belgium fell from more than 268 thousand piglets in 2022 to 213 thousand in the first 22 weeks of 2023. So far, in 2023, about 23 thousand more piglets will go to Romania. This brings the total to more than 63 thousand piglets, making Romania the fourth largest market for Dutch piglets. This is followed by Austria with almost 17 thousand piglets and Italy with more than 15 thousand piglets, a drop compared to 38 thousand piglets in the first 22 weeks of 2022. The UK pig industry achieved a remarkable milestone by surpassing the 30% reduction target in total antibiotic use set by the RUMA Targets Task Force (TTF) between 2020 and 2024. This achievement represents an impressive eight-year reduction of 75%, highlighting the collaborative efforts of farmers, veterinarians, and stakeholders in the pig industry. Data reveals a 20% reduction in antibiotic usage for treating pigs on farms in 2022. This brings the total reduction since 2015 to 75%, highlighting the industry's dedication to promoting the health and welfare of pigs while minimizing antibiotic use. AHDB data representing approximately 95% of pigs slaughtered in the UK show that antibiotic use in 2022 stood at 70mg/PCU, a significant improvement compared with 87mg/PCU in 2021.

The USDA reports that US pork exports in April amounted to 243.79 thousand mt, valued at USD 660.1 million, up 15% YoY in volume and 10% in value. For Jan-April, US pork exports totaled 960.48 thousand mt, worth USD 2.62 billion, an increase of 14% in volume and 13% in value compared to the same period in 2022. USMEF indicates that global pork demand continues to be a positive gesture for the entire US pork supply chain. While Mexico remains a top importer of US pork, it’s encouraging to see growth in many markets. Latin American demand has remained strong while the momentum for US pork into the Asia Pacific region has also been increasing. This is critical for maximizing pig carcass value and generating revenue for an industry that is facing difficult economic conditions. CONAB expects the Brazilian meat supply in the domestic market to recover in 2023, with pork production estimated to surpass 5.3 million mt, the highest volume on record. As a result, the availability of pork per capita is expected to amount to 19kg per inhabitant per year, unchanged from 2022 levels. The increase in the supply of pork on the domestic market is compensated by the increase in population and exports.

Despite the difficulties with the price and availability of raw materials and the uncertainty that the arrival of the El Niño phenomenon is generating in agriculture, the Colombian pork industry is experiencing one of its best moments, both in terms of productivity and consumption. According to Porkcolombia, Colombian pork production in 2022 reached a record 526 thousand mt, up 7.2% compared to the 491.24 thousand mt recorded in 2021, with per capita consumption at 13kg per inhabitant per year, almost 1kg higher YoY. This indicates the highest continuous growth in the last 12 years, at an average rate of 7.4% in profit and 9% in production. In 2022, around 90% of pork production in Latin America was concentrated in Brazil (5.2 million mt), Mexico (1.7 million mt), Argentina (0.72 million mt), Chile (0.57 million mt), and Colombia (0.52 million mt). However, although Colombian production represents only 10% of Brazil's volume and 30% of Mexico's volume, to maintain the current pace of growth, in the medium term, Colombia can rank as the third largest country in pork production, surpassing Argentina and Chile. Notably, Colombia was the region's pork market that grew the most in production over the last 5 years, up 7.3% YoY on average, surpassing Brazil and Argentina, whose YoY average expansion was 6.2% and 5.5 %, respectively. Meanwhile, the lowest records were evidenced in Mexico and Chile, which revolved around 3% YoY. According to Porkcolombia, in 2022, 5.5 million pigs were slaughtered by authorized plants, up 6.6% YoY, an increase of 342.02 thousand heads. However, the high dependence on imported raw materials for the preparation of animal feed, and the high intermediation margins for the commercialization of meat, accompanied by some health and biosecurity problems are some of the current weaknesses.

Lastly, in Jan-May 2023, Ukrainian pork imports amounted to 4.2 thousand mt, worth USD 1.7 million, down 5.3 times in volume compared to the same period in 2022. In May-2023, Ukrainian pork imports totaled only 603.5mt, slightly more than in April-2023, but significantly less YoY. In the Jan-May period, pork shipments were mainly sourced from Denmark (41.3%), the Netherlands (27.7%), and Poland (11.9%). ASU indicates that significant volatility of purchase prices in May, in particular their increase at the end of the month, somewhat revived the activity of importers in the last week of spring. However, this did not have a significant impact on the market situation. The main inhibiting factor is the increased prices in the EU pork market and, accordingly, on import positions. In particular, the average price of pork imported in May amounted to USD 2.82/kg against USD 2.4/kg in April and USD 1.9/kg in March.