W45: Pork Update

In W45 in the pork landscape, Rabobank reports that the global pork markets and trade face the persistent challenge of steady production growth and subdued consumption. While improved health and productivity contribute to the production boost, uncertainties persist, and geopolitical tensions make consumers cautious. Key growing regions are overcoming productivity challenges, with a focus on cost reduction leading to enhanced production per sow. However, this positive production trend, along with lower feed prices, exacerbates regional oversupplies, putting downward pressure on the market. Pork consumption remains resilient amid inflationary pressures, but changes in pack types and sales channels reflect shifting consumer behavior. With ongoing caution due to geopolitical uncertainties, cost-conscious consumer spending is expected to persist, benefiting pork consumption due to the high costs of competing proteins and increased home cooking trends.

The white coat pork market in Europe is grappling with a 24% year-on-year (YoY) price decrease in Nov-23, hitting its lowest point of 2023 due to an imbalance between supply and demand. Increased animal weights and oversupply have triggered further price reductions. Although demand in the meat market remains resilient, continual drops in carcass prices are activating sales. Among major European countries, Germany maintained stable prices, while the United Kingdom (UK) market experienced a decline influenced by storm Ciaran. Vehicle restrictions and power outage issues in the UK impacted withdrawals and contributed to the price drop. Despite an ongoing decrease in supply, a more pronounced drop in demand is dictating the market, resulting in a USD 0.018 decrease in prices on November 9. The German slaughter pig market maintains balance, with diminishing regional surpluses and quick uptake of offers at the recommended price of USD 2.27 per kilogram (kg). Suckling pig prices are rising due to high demand and a national supply shortage. The overall pork business is more active, with rising demand for consumer goods and processed meat across all cuts.

Tridge’s data analysis indicates that the wholesale prices of frozen pork ham and shoulder in Madrid, Spain, averaged USD 3.11/kg in W44. This marked a 0.96% week-on-week (WoW) drop, a 2.51% month-on-month (MoM) decline but a 19.69% YoY increase. The 2023 pork prices have followed a bullish trend compared to values observed in 2021 and 2022, attributed to diminishing pig herds and reduced production. The European Commission (EC) notes that Spain's pig slaughter totaled 30.6 million heads in the first seven months of 2023, and is expected to reach just over 52 million heads by the year-end. This signifies a 7.6% reduction from the 56.3 million pigs slaughtered in 2022, following a 3.5% decline from 2021. Moreover, the Porcine Reproductive and Respiratory Syndrome (PRRS), particularly the Rosalia strain, has led to a substantial reduction of 5 million pigs on Spanish farms in 2023, disrupting the market and driving up pork prices. This has resulted in increased rates of abortions and stillbirths, as well as premature births and weak surviving piglets, negatively impacting rearing and fattening operations. Pork prices in Spain are anticipated to remain bullish throughout 2023 and into 2024, primarily due to a decline in pork production, potentially leading to a drop in Spain's pork exports.

Lastly, the United States (US) pig industry, which has historically enjoyed robust profitability, is facing a prolonged downturn with an expected overall loss of nearly USD 21 per pig in 2023. Elevated input costs, including a surge in corn prices by almost 80%, soybeans by 42%, petrol by 48%, and refrigerated trucking rates by 50% from Jan-20 to Apr-22, contribute to this challenge. Proposals like California's Proposition 12 and animal welfare laws in various states impose substantial expenses for retrofitting sow housing and other pig facilities. Major industry players are closing farms and processing plants for efficiency reasons, indicating broader challenges. US pork demand is low, potentially influenced by inflation, with lean hog futures on the Chicago Mercantile Exchange at life-of-contract lows. This comes as the industry grapples with questions about taste and the impact of pursuing ever-leaner pork on consumer preferences. If the current trends persist, producers could incur losses of USD 20 to 30 per head over the next six months, potentially resulting in a significant industry equity loss.