The pork sector on the world scene has been dominated by the credit crunch and the impact of the Novel H1NI 2009 influenza virus. Both have affected pork’s major players — some worse than others.
Let’s take a look at the current status of some of America’s competitors.
China has half of the world’s pigs, so it’s the logical place to start. According to USDA’s Foreign Agricultural Service, sow numbers in 2009 increased 6 percent to a record 50.1 million head. That’s on top of a 7 percent increase in 2008.
USDA data suggest that 2010 pork production will continue to rise to 50.3 million metric tons, up 4 percent from 2009. This is fueled by government sow subsidies and improved porcine reproductive and respiratory syndrome virus (or “blue-ear disease”) control.
Pork consumption was on the rise in 2009, until H1N1 influenza cut it for a bit in April and May. But following the World Health Organization’s decision to change the name from “swine flu” to Novel H1N1, pork consumption rebounded rapidly.
As local supplies grow, China’s pork imports are expected to continue falling to an estimated 120,000 MMT this year, with 60 percent coming from the European Union. Meanwhile, China’s exports are forecast to increase 4 percent to 240,000 MMT.
Traditional backyard operations are declining, but the average hog-farm size is growing. In 2008, farms of 50 hogs or more accounted for 56 percent of total slaughter, up 8 percent from 2007. These larger operations are more likely to practice disease-control measures and have contracts with slaughter outlets, making returns more predictable.
This consolidation will continue in 2010. The question now is whether China’s government subsidies, introduced in 2007 to expand pork production, will continue. The subsidy grew from RMB50 ($7.32 U.S.) per head to RMB100 ($14.64) before expiring in most regions by mid-2009. However, a sow insurance subsidy of RMB60 ($8.80) per head will continue into 2010.
Recently, China has faced foot-and-mouth disease outbreaks in southwest China — Sichuan, Guizhou, Yunnan and Chongqing provinces — where there are many backyard farms (less than 50 sows). While large systems attend to biosecurity and disease prevention, backyard producers are lagging behind.
Russia is flexing its muscles and looking to become a major global influence not seen since the break up of the Soviet Union. Russia does not want to rely on imports, and state subsidies continue to stimulate investment in swine production. Deputy Prime Minister Viktor Zubkov has said that by 2012 Russia will be able to stop almost all pork imports. That would require increasing domestic production by 200,000 MMT annually.
From 2006 to 2008 state funding increased the annual swine capacity by 193,600 head. In August 2009, the Ministry of Agriculture increased state support to agriculture from 100 billion roubles to 183 billion (about $5.8 billion U.S.), which was a 30 percent jump from 2008. The money will be spent on 156 construction projects, including 42 swine farms. In the first half of 2009 alone, 85 new farms were constructed, including 31 swine operations.
Much of the breeding stock for these new projects comes from the United Kingdom and Denmark. European consultants are either based in Russia or travel there regularly to consult on production practices. Job allocation is very rigid — multi-tasking is not in the Russian vocabulary, resulting in over-staffed units. For example, if a veterinary technician saw a drinker leaking he or she wouldn’t attempt to fix it, as that’s a plumber’s job.
Because of state subsidies, 2010 pork production is forecast to be 2,290 MMT, up from 2,205 MMT last year. Pork imports are forecast at 750,000 MMT, unchanged from 2009. This reflects Russia’s determination to protect its swine industry as it approaches self-sufficiency targets. To expand pork production further will mean continued state financial support. Vertically integrated companies are increasing their market share as the less efficient producers exit. By late June 2009, backyard farmers represented 40 percent of Russia’s swine herd versus 44 percent in 2008.
Import controls on pork have caused shortages for processors, but they’ve worked around this by importing live market hogs. From 2005 to 2008, live-pig imports increased by a factor of 7, with 50 percent coming from neighboring Lithuania. But the import holds have continued to raise pork prices. Between July 2008 and June 2009 farm prices rose 32 percent, processors’ prices grew 19 percent and retail prices increased 30 percent, according to USDA reports.
As for diseases, southern Russia has recently had outbreaks of African swine fever.
Brazil is an impressive country. It’s the fifth-largest country on the planet, and more than 60 percent of its landmass is used for agriculture. It also has the right climate to grow the two staples hogs need — corn and soybeans. Brazil has massive potential to be a low-cost pork producer.
A major global soybean exporter, Brazil is making less available to the European Union, which is causing significant concerns. Market experts are saying that the European Union must find other protein sources.
USDA sources forecast that Brazil’s pork production will continue to increase at an average rate of 4 percent this year, slightly above the 2009 level. Pork exporters there are optimistic that 2010 sales will increase 8 percent, based on the assumption that the worst of the global financial strife is over and firm demand will return. Brazilian pork exporters also are focusing on new markets such as China and have initiated efforts to access the U.S. and Mexican markets.
Forecasts suggest that 2010 swine production will increase slightly (0.3 percent) and the same as in 2009. Of course, this is subject to the effects of the global credit crunch and Novel H1N1 influenza issues, as Mexico was perhaps hit the hardest during that episode. (Because of the “swine flu” label, producers there even tried to reduce the impact by giving free pork to consumers.)
Lower pork prices, a promotion campaign and increased availability of pork products could boost demand this year. Mexico’s pork consumption is expected to rise by 2 percent, helped by a drop in red meat consumption and a growing perception that pork is a healthier meat.
In 2010, Mexico expects to increase its pork exports by approximately 10 percent. As with most countries, Mexico has its eye on China. If Mexico signs an animal-health agreement with China — essential for accessing that market — exports could be even higher.
Mexico’s meat processors continue to use imported U.S. pork variety meats, lard and grease. Despite the political and domestic pressures generated by Mexican pork producers, meat processors must continue to import pork products because domestic production is not sufficient to meet their needs.
Denmark exports 90 percent of its production, which is worth DKroner 26 million ($4.8 million U.S.) annually. Historically, Denmark was the No. 1 European pork exporter, but Germany now wears that crown. Ironically, some of the German exports originate in Denmark, as 7 million weaned pigs and 1 million slaughter hogs are shipped there to finish out.
The world recession has impacted the Danish pig industry, as it’s affected the traditional export markets. The weak U.K. pound has made Danish imports expensive, so the Danes are losing out in Great Britain — a major export market for over 150 years.
Many producers lost money through 2008 and 2009, and most are only surviving due to their excellent productivity. The average herd raises 26.6 pigs per sow per year and the top 25 percent hits 29.3 pigs. Budget figures for 2010 and 2011 show a return to profit through higher pig prices and lower feed costs.
On the positive side, the demand for Danbred breeding stock remains strong as exports have risen steadily — about 150,000 gilts are being exported, despite the credit crunch.
Sizing up Global Pig Production
Here’s how the countries’ pork production stacked up in 2008. The numbers represent the per-head count of the national pig herd.