Reduced growth in pig production in 2022
2022 will come with reduced growth in pig meat production, as the global market is still influenced by the COVID-19 crisis and macroeconomic trends, according to the latest quarterly report from Rabobank. Production costs have gone higher this year and an increase in prices is not stimulating demand, especially in income-sensitive countries. Pork consumption is expected to fall further in 2022 and growth in production will follow. At the same time, markets that witnessed a decline in pig meat prices are to deal with oversupply resulting from this year's production and a decline in trade. The rapid decline in prices and resulting producer losses in some markets will slow 2022 herd growth, helping offset improved herd health and reduced African swine fever (ASF) impacts. Prices have since stabilized but remain well below the peak, says the report.
China is the world's largest pig producer and also the largest importer, as the country is fighting ASF for more than 3 years. Chinese producers responded to rising costs and the continued threat of ASF outbreaks by reducing the herd, thus driving hog prices to new lows and forcing high-cost producers to exit. Demand remains weak, limited by pandemic dining restrictions. In response to this slowdown, China continues to limit imports in an effort to balance supply. Given ongoing demand weakness, Rabobank expects pork supplies to remain ample following herd reduction and previous restocking, but supplies could be short of needs should economic trends improve.
In the EU, the largest pork supplier in the Chinese market, average prices have already dropped by 24% due to reduced demand from China. Producers in Germany and the Netherlands are liquidating the herd and are expected to reduce production in the coming months. Meantime, Spain and Denmark are expected to increase their pig herd but at a slower rate than in the last couple of years.
US hog supplies will remain tight through early 2022 but will be higher compared with prior-year levels. Even so, rising costs and added regulatory constraints are expected to moderate expansion plans, as are packing constraints made worse by labor availability. Domestic demand is expected to slow as higher costs are passed through to consumers, with export growth acting as a welcome buffer.
Brazilian producers remain optimistic, despite a 34% YOY increase in feed costs. Sales into export markets remain strong, helped by weakness in the Brazilian real and larger pork supplies. Analyts expect a 5.5% YOY increase in pork production, with additional growth anticipated in 2022.
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