W38: Pork Update

In W38 in the pork landscape, the United States Department of Agriculture (USDA) indicates that European Union (EU) pork production is shifting towards the domestic market due to reduced exports to third countries and rising feed costs, which impacted piglet breeding in 2022. The USDA also notes improved profit margins in 2023, likely resulting in a temporary increase in pig slaughters in the second half of the year, though insufficient to offset earlier reductions. Significant cuts in pig production are expected across most EU countries, contributing to a decrease in EU pork production, estimated at 21.15 million metric tons (mmt) by 2024. The EU pork sector is exploring alternative export markets to compensate for China's sluggish demand recovery amid an economic slowdown. Additionally, a shrinking domestic market is noted as EU consumers increasingly prefer poultry over pork, citing health considerations, convenience, and relatively low prices.

Spain's pig and pork production is projected to decline in 2023 and 2024, dropping to under 5 mmt of pork and fewer than 55 million slaughtered animals. This decline is attributed to strict animal welfare regulations, reduced pork exports to China, and adjustments required by the Spanish Royal Decree 159/2023. Piglet imports from the EU may resume in 2024, partially offsetting the decline. Spain's domestic pork consumption decreased in 2022 due to high prices despite measures like reducing value-added tax (VAT) for basic food products aimed to curb food inflation. A rebound in tourism and hotel, restaurant, and institutional sectors could moderate the consumption decline. Pork exports to non-EU markets are expected to decrease, while shipments to other EU countries remain robust due to shortages. Spain primarily imports pork from other EU countries. However, as prices rise, imports from non-EU markets with low rates may increase, particularly for processing plants.

Pig farmers in São Paulo, Brazil, are witnessing a recovery in their purchasing power in Sep-23, following a dip in Aug-23. The Center for Advanced Studies in Applied Economics (Cepea) attributes this improvement to the increased live pig value compared to essential inputs like corn and soybean meal. Concerns arose in Aug-23 due to reduced farmers’ purchasing power, questioning pig farming viability. Growing pork demand prompted slaughterhouses to procure new batches of pigs, particularly those at optimal slaughter weight, increasing live hog selling prices in the market in early Sep-23. Consequently, São Paulo's pig farmers are currently in a more favorable position to manage production costs and sustain profitability. Cepea expects São Paulo's pig industry to continue rebounding and thriving as pork demand remains robust in the forthcoming months.

Lastly, the Poultry and Swine Intelligence Center (CIAS) of Embrapa Swine and Poultry indicates that pig production costs in Brazil declined by 0.71%, closing at 332.6 points in Aug-23. This ICPSuíno index reduction is primarily attributed to the decrease in the nutrition component, which experienced a 0.79% month-on-month (MoM) drop and held a significant weight of 73.18% in the total cost calculation. Consequently, ICPSuíno recorded a cumulative 27.98% drop since Jan-23 and a 23.85% decline over the past 12 months. This reduction in production costs led to a cost of USD 1.18 per kilogram (kg) of live pig produced in a full-cycle system in Santa Catarina in Aug-23. This represents a decrease of USD 0.0081/kg of live pig compared to Jul-23. The technical coefficient adjustments made in Jan-23 contributed to a 16.2% reduction, with prices accounting for the remaining variation over the year and the past 12 months.