Editor's note: The following article was published in the USDA's Livestock and Poultry: World Marks and Trade report.
Global production is forecast nominally higher to a record 104.7 million tons.
Rising feed costs, which shrink profit margins, will only be partially offset by improving efficiencies and intervening government programs in some countries.
China, accounting for nearly half of world production, is forecast 1 percent higher to a record 52.0 million tons. The anemic growth is largely attributed to weaker consumer demand resulting from relatively slow economic growth, which, squeezed by rising feed costs, has tightened producer margins. click image to zoom Poor hog prices in 2012 slowed expansion of swine production facilities and further encouraged small-scale producers to exit the industry. This is expected to result in nominally lower breeding stock in 2013 and only a slight growth in hogs available for slaughter. However, production efficiencies continue to improve as large and modern farms expand at a faster pace than the exit of backyard operations. The government also continues to support the pork industry through productive sow subsidies, boosting breeding stock imports to record levels, and occasional pork purchases in an effort to support prices.
Brazil’s production is expected to grow 2 percent, to a record 3.3 million tons, supported mostly by strong international demand and producer optimism for continued recovery in export markets. However, a major concern for hog producers is the recent increase in feed grain prices, which could squeeze margins. The government has already intervened in the market with subsidized corn auctions to protect the industry, extended deadlines for credit payment, and temporarily suspended state taxes.
Russia is expected to increase production by 1 percent to 2.1 million tons, although higher feed grain prices are expected to constrain expansion. Large farms are increasing production through economies of size and scale, supported by government programs. However, small private farms, many in regions affected by outbreaks of African Swine Fever, have been forced to exit the industry.
EU production is expected to ease by 1 percent to 22.6 million tons as the industry copes with rising feed costs and stringent EU animal husbandry requirements. These requirements are resulting in a restructuring of the industry, with the most inefficient commercial farms exiting production. The pig crop is expected to remain constant, while higher feed costs cause lighter slaughter weights.
The United States is forecast down 1 percent to 10.4 million tons as high feed costs are expected to dampen production through reductions in farrowing and lighter slaughter weights as producers attempt to minimize feed costs. Only modest reductions to the breeding stock are forecast, leaving swine producers prepared to accelerate pig production in the latter part of 2013, when the feed grain outlook is expected to be better.
Canada’s production is lowered 1 percent to 1.8 million tons as high feed costs and reduced demand for feeder hogs in the United States are expected to adversely impact the recovery in the hog sector, which began in early 2012. Faced with higher input costs and financial difficulties, some smaller producers are expected to liquidate inventories beginning late 2012 and into 2013, resulting in a smaller pig crop and slaughter in 2013. Slaughter weights will reflect producers’ attempts to mitigate feed costs.
Japan’s output is projected down 1 percent to 1.3 million tons as producer margins are negatively impacted by high feed costs coupled with low pork prices. Reduced breeding stock leads to a smaller pig crop, while rising feed costs push producers to slaughter at lighter weights. Weak consumer demand caused by slow income growth is expected to pressure prices. Mexico’s production is expected to fall 1 percent to 1.2 million tons as rising feed costs are expected to result in lower slaughter weights despite government support. Hog producers continue to improve efficiency through the incorporation of new breeding lines that are better able to adapt to the Mexican production system and enhanced farm management techniques, mitigating the decline in sow numbers.
South Korea is forecast 2 percent lower to 1.1 million tons as producer margins are squeezed by record high feed grain prices. Other factors dampening production are regulations for hog operations including provincial laws designating areas restricted from livestock production, animal space requirements, stricter requirements for manure disposal, FMD vaccination requirements, and traceability.