W44: Pork Update

In W44 in the pork landscape, the Food and Agriculture Organization (FAO) reports that the meat price index averaged 112.9 points in Oct-23, a fourth consecutive monthly drop. This also represents a 0.6% decrease compared to Sep-23 and a 3.4% year-on-year (YoY) decline. Notably, global pork prices have dipped for the third consecutive month, driven by sluggish international import demand, particularly in certain East Asian countries. Additionally, a significant influx of export offers from key suppliers has further pressured pork prices downward.

The United States Department of Agriculture (USDA) anticipates global meat exports to amount to 35.4 million metric tons (mmt) by the end of 2023, a 3% decrease from the 36.5 mmt recorded in 2022. This decline is primarily attributed to decreased beef and pork shipments. The USDA's projections indicate that 10.1 mmt of pork is expected to be exported in 2023, a decrease of 800 thousand metric tons (mt) compared to the 10.9 mmt in 2022. The primary pork exporters would be the European Union (EU), the United States (US), Brazil, Canada, Chile, Mexico, Russia, the United Kingdom (UK), China, and Australia.

The European Commission (EC) reports that the European pork market is grappling with a second consecutive year of reduced supply, with production expected to decline by 6.6% YoY and over 10% compared to the five-year average in 2023. This production drop is consistent across major European pork-producing countries. Spain shows significant declines, with 2023 slaughters continuing at a reduced pace. A similar trend is evident in the UK, where 780 thousand pigs were slaughtered in Sep-23, an 11% YoY decrease.

EU pork imports in the UK have fallen by 16% YoY despite declining domestic production, indicating a dip in pork demand due to consumer cost-of-living challenges. Comparable patterns are observed in other major European pork-producing countries like Germany (-9% YoY), the Netherlands (-15% YoY), and Denmark (-21% YoY). These developments are impacting the hog processing industry, leading to facility closures and reorganizations. France is also facing a 3% YoY drop in pork consumption and reduced imports and exports, further challenging the European pork market.

Spain's pork and pork preparations exports reached 999.36 thousand mt in the first three quarters of 2023, a 16% drop compared to the same period in 2022. All major export destinations experienced declines compared to the previous year, except for the UK, which saw a 6% YoY increase. China maintains its position as the top destination, accounting for 43.6% of total exports. However, pork imports from Spain decreased by 12.33% in the first nine months of 2023 compared to the same period in 2022. The Philippines witnessed the most substantial decrease of 37.55% YoY in shipments from Spain, with its market share declining from 15.54% in 2022 to 11.56% in 2023. Exports to Japan and South Korea also dropped by 11% and 24%, respectively.

Meanwhile, the wholesale prices of frozen pork ham and shoulder (dressed) in Hefei, China, averaged USD 1.97 per kilogram (kg) in W43, an 11.66% week-on-week (WoW) drop, a 19.59% month-on-month (MoM) decline, and a significant 53.95% year-on-year (YoY) decrease. This weekly average price has consistently remained below 2022 levels since Apr-23 and has declined by 21.83% since the start of 2023. This price decline can be attributed to an oversupply in the market, resulting from increased imports and a resurgence in domestic production. China imported 1.27 mmt of pork and 835 thousand mt of pork by-products from Jan-23 to Sep-23, a 9% YoY increase.

Lastly, China's domestic pork production surged by 4.8% in Q3-23, reaching 12.69 mmt compared to Q3-22. This boost in domestic production was spurred by high inflation, leading producers to sell pigs prematurely and reduce production capacity. Anticipated lower domestic production and ongoing economic challenges signal a decline in pork consumption for 2024. However, the hospitality and retail sectors are expected to maintain similar demand levels. Given the ample supply, the market's future trajectory will largely depend on demand in the upcoming months.