World pork trade is becoming more complicated
World pork trade will continue to grow, but the landscape is becoming more complicated and extremely competitive, according to a Rabobank analysis.
China and some other Asian destination are the main markets for the largest exporters: the EU, US, Canada, and Brazil. "Global pork trade flows continue to change, both for exporting countries and destination countries. And the pork products being traded also continue to adapt to the changing demand', considers Jan Peter van Ferneij, Rabobank Senior Animal Protein Analyst.
Nevertheless, the consumption decline in some mature markets and the risks associated with different diseases, such as PEDv or African Swine Fever, are the biggest challenges for the producers.
Steady consumption
China is the largest market for pork and it's going to stay that way but, in the last 12 months, this market has been confronted with an increased domestic production. Low prices have generated a pig liquidation phenomenon that led to an increase in slaughtering and production in the first quarter of the year.
According to data released by the Chinese Ministry of Agriculture, in the first three months of 2018, pig slaughter increased by 1.9%. year to year, up to about 200 million animals, and pork production increased by 2.1%. up to 15.4 million tons.
The trend is still present as Chinese pig breeders have reduced the number of pigs in May this year by 1.9%, compared with the previous month. Also, the number of sows decreased by 2.5%. Compared with May 2017, pig population in China decreased by 3.9%.
Pork consumption in this market is going to remain unchanged in the next 4 years, at 58 million tonnes, according to a Rabobank long-term forecast. A small increase is to be seen by 2023, said the analysts.
EU producers are holding 60% of the Chinese market share imports, with Germany and Spain taking the lead, with a respective 15% and 13% share of total trade. In the coming years, imports could fluctuate depending on national supply and the development of demand.
Bad luck
Caught in a trade war with China, the US pork industry could lose a part of the 12% market share but for now, China doesn't seem to be in need of another supplier. "It may be the EU’s bad luck to get a competitive edge on US pigmeat in China just when Chinese demand for imports is slowing. Looking across to China no one knows how many pigs there are in the Chinese pig population – or its rate of growth- but we do know that there are numerous reports of large-scale producers expanding and we know that China’s imports of pigmeat have declined rapidly in 2018", Dr John Stark said in a commentary for Pig Progress magazine.
In this global landscape, pig producers can only hope that their packer costumers will find other markets to deliver pork products.
Japan could be an alternative market for exporters, as the local population is changing its diet from fish to more pork and the national production is in a slow decline. Also, South Korea, Taiwan and Philippines have increased their demand for imported pork but the opportunities in these markets are depending on the cuts requested by the consumers.
"Last year, global trade in pork amounted to 8.3 million tonnes with a value exceeding $20 billion. The volume stands for 7.5% of the global production and 91% of it is exported by the four top players: the EU, US, Brazil and Canada. Frozen products are the main items present in the world pork trade.
Between 2010 and 2018 world pork trade has increased by more than 37%, despite a slight decrease registered last year due to a reduced import demand from China", mentions the Rabobank analysis.
Biosecurity risks
The EU exported 2.9 million tonnes of pork and by-products in 2017 and 75% of that volume was delivered in Asia. Nevertheless, a biosecurity risk represented by the spread of African Swine Fever (ASF) in Eastern and Central Europe could bring down the whole industry if the virus reaches Germany, for instance.
By now, Romania, Bulgaria, Hungary, Poland and the Czech Republic have reported cases of ASF in wild boar population and farms. A computerized simulation of how the virus is spreading showed that a German ASF crisis is not a scenario that can be excluded. In fact, a research team from Poland thinks that it could become reality in 4 years or so.
An animal health issue that can ban one of the largest pork producer and exporter from the EU could have a significant impact on world pork trade, with repercussions for the whole industry in the area. Competition on the global pork market is going to increase in the next few years and any disruption in trade can be filled by introducing another supplier in the game.
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