Pork, poultry and beef are the three most consumed meat types in the world. The global meat production has increased by a CAGR of 1.7% from 219 (million MT in 2006) to 258.2 (million MT in 2016), whereas global consumption has increased by a CAGR of 1.4% from 221.7 (million MT in 2006) to 255.1 (million MT in 2016).
Internationally, pork is also the most produced meat followed by poultry and beef. Pork account for 41.9% and 42.3% of the global meat production and consumption respectively.
The choice of meat varies from region to region and pork production and consumption is mostly concentrated in China, this accounts for 47.9% and 50.1% of the global pork production and consumption. Moreover, this is followed by EU with 21.6% production and 18.6% consumption and the US accounting for 10.4% production and 8.8% consumption (2016).
The international production and consumption of pork increased at a CAGR of 2.3% during 2007-14. However, the growth was primarily led by China, where the production and consumption grew at a CAGR of 4.1% and 4.3% respectively. However, ROW registered a muted pork production and consumption at a CAGR of 0.7% and 0.4% respectively in 2007-14 period. Similarly, although the global pork production and consumption declined in 2014-16. This was mainly due to a fall in production and consumption in China, while ROW witnessed increased production and stable to marginally increased pork consumption during the same period.
China has largely remained self-sufficient in pork production and consumption owing to healthy pork demand and large sow (female pig) inventory. Furthermore, pork import was minimal in the country up till 2014. This helped in low pork prices in China during the period (2011-14). However, China’s pork production declined in 2015-16 due to declining sow inventory, which was mainly on account of decline in sow population and introduction of the Environment Protection Act. This came into effect from January 2015 and imposed severe penalties for breeders, who mismanaged the waste, this, in turn, led to the shutdown of many small pig farms. The decline in sow inventory and production in China resulted in the rise of sow prices. Consequently, although pork demand declined in China, the fall in production was much larger and led to increased pork imports by the country. China’s pork imports increased by 35% and 133% respectively on a YOY basis, increasing from 0.76 (million MT in 2014) to 1.02 (million MT in 2015) and 2.4 (million MT in 2016).
This benefited the EU which was reeling under pressure because of a declining domestic pork demand on health concerns and Russia’s banning of pork imports from the region, which will last till 2018. There was an outbreak of African swine fever in some areas of the EU and the union was unable to negotiate with Russian authorities leading to a ban of pork imports. Additionally, after 2013, a decline in domestic and export demand led to a fall in pork prices in the EU. However, EU’s pork export received support from China and the demand increased by 52.5 % from 2.1 (million MT in 2014) to 3.3 (million MT in 2016). This led to a price recovery in the EU in 2016 in the local currency terms (12.2% on YOY basis). But because of the devaluation of euro against the USD, the prices declined in USD terms (10.2% on YOY basis). In spite of this, pork prices in the EU remained comparatively higher than the US (in the US dollar terms).
The US, on the other hand, missed the opportunity to cater pork imports to China due to the nations zero tolerance policy on the use of ractopamine, a feed additive used by many nations including the US to help lean muscle growth in pork. This led to the disqualification of the US-based pork producers by China. The US along with other key pork producing and exporting nations such as Brazil and Canada continued to fulfil ROW’s pork demand, mainly emanating from countries like Japan and Mexico. However, the establishment of CODEX standards and research indicated that ractopamine can be used safely and towards the end of 2015, few of the US pork meat processing units passed the ractopamine-free program and are presently qualified to export to China, thereby, increasing competition for EU in the Chinese market.
China’s demand is very price sensitive and is in tandem with most of the other Asian economies. In addition, with the export qualification of the US-based low-cost pork producers, the nation’s import demand (80% of which is currently met from EU) might shift to the US in order to maintain the export market in China, the EU will have to compete with the low-priced US pork. Simultaneously, high pork prices in China have encouraged large-scale producers to expand their operations to stimulate herd recovery. The rise in breeding stock is expected to increase pork production in China in the present year. According to USDA, China’s pork production and consumption are expected to increase by 3.7% and 3.3% respectively in 2017 as sow inventory is projected to increase at 1.2% YOY basis. A higher than consumption increase in production will lead to lower pork import demand from China. This will make the situation worse for the EU which might be forced to find alternative export markets or cut down pork production significantly, else pork prices could hit all-time low in the European market. Although, the global pork demand and supply will increase and will be supported by an expected recovery in China. The ROW pork market which has always been in oversupply situation can expect to witness lower pork prices on an increase in pork supply from the EU.
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