W26: Pork Update

In W26 in the pork landscape, according to Rabobank's June report, US hog prices increased due to tighter supplies and improved clarity on implementing California's Proposition 12. Weekly slaughter is down 1% YoY, and lighter weights have decreased by 1.6%, leading to reduced production since late May-23 and stabilizing prices. Rabobank expects prices to rebound and feed costs to decline, with a projected 7% decline in the US sow herd over the next 12 to 18 months to restore profitability. Pork cutout levels are currently 20% below the 2022 level, with belly prices down 46%, loins down 17%, and ribs down 36% YoY. However, hams registered some improvement. Slowed consumption is attributed to higher pork prices and reduced retail promotions. Rabobank anticipates increased pork sales during the summer as retailers buy pork more frequently. Large cold-storage pork inventories are expected to decline, and 2023 second-half prices are expected to improve with lower production, improved consumption, and increased exports. In Apr-23, pork and pork variety meat exports were up 10% in volume and 7% in value compared to Apr-22, driven by increases in China/Hong Kong (26%), South Korea (43%), and Mexico (5%), with declines in Japan (-2%) and Colombia (-41%). Pork imports dropped 33% in volume, and Rabobank forecasts an 8% YoY export growth in 2023 due to the favorable cost of US pork in global markets. 

In May-23, pork exports (fresh, processed, and offal) from the state of Santa Catarina in Brazil reached 54 thousand mt, a slight decrease of 4.6% MoM but a significant increase of 16.1% YoY. The revenue generated from these exports amounted to USD 139.5 million, a slight decline of 1.4% MoM but a substantial growth of 24.1% YoY. In Jan-23 to May-23, Santa Catarina exported 260.7 thousand mt of pork, valued at USD 643.6 million, an increase of 14.0% in volume and 27.0% in value compared to the same period in 2022. Santa Catarina accounted for 56.5% of the revenue and 55.1% of the volume of pork exported by Brazil in 2023. During the Jan-May period, Santa Catarina registered a 4.8% increase in pig production, with 7.40 million pigs sent for slaughter. Of these animals, 90.6% were slaughtered within the state, while the remainder were sent to slaughterhouses in other states.

Destatis indicates that, as of May 3, German pigs totaled 20.7 million, including piglets and breeding sows, a decrease of 1.6 million YoY and 4 million compared to 2021, and the lowest level since the country's reunification in 1990 at 30.8 million. The decline in pig numbers is attributed to the decreasing pork consumption in Germany. Additionally, there has been a decline in the number of pig farms, with 15.9 thousand farms, nearly 11% fewer than in 2022 and a decrease of over 19% compared to 2021. Similarly, according to the State Statistical Office of Baden-Württemberg in Germany, the pig population in May-23 stood at 1.27 million, a decrease of 6% YoY (82 thousand). The number of pig farms also significantly declined, with approximately 1.55 thousand farms (-190 farms). The number of piglets and young pigs reached a particularly low level, with a 15% YoY decrease in piglets and a 3% YoY decrease in young pigs. This decline is linked to a more than 40% YoY decrease in the number of breeding sows, standing at 104 thousand in May-23. Currently, there are around 630 farms with breeding sows, a drop of 11% YoY. However, the production of fattening pigs reached a similar level as in May-22, with a herd of 527 thousand animals (+1% YoY). Notably, there was a significant increase of 6% YoY in the herd of heavy fattening pigs weighing more than 110 kg.

Lastly, in Q1- 2023, Danish pork exports (including processed goods and live pigs) amounted to 454.74 thousand mt, valued at USD 1.44 billion, down 11.7% in volume but up 20.9% in value compared to Q1-22. This decrease in Danish production, coupled with reduced global demand, resulted in a noticeable drop in pork exports. Germany accounted for over 20% of Danish export revenues, with exports totaling 97.31 thousand mt, a decrease of 11.9% YoY. China remained an important export market but experienced a significant decline of 18.1% in pork exports. The value of exports to Poland increased, surpassing China and pushing it to third place. Despite the overall decline in exports to third countries, Danish trade was supported by the export of live pigs, which increased by 13.2% to 110.29 thousand mt, with shipments mainly destined for Germany and Poland.