As inflation outpaces wage growth, Rabobank analysts forecast lower real wages will negatively impact protein consumption in the fourth quarter of 2022 and the first half of 2023. When macroeconomic conditions soften, pork historically does better in most markets than many protein alternatives. However, experts say global pork prices will be affected by lower consumer confidence.
“Value-conscious consumers are already seeking out lower-value cuts and trading down from branded to private label alternatives at retail,” writes Christine McCracken, executive director and senior animal protein analyst at Rabobank in Global Pork Quarterly Q4 2022.
Consumers are also limiting foodservice purchases, which adds further weakness to premium product markets.
“Anticipating some seasonal strength in demand, processors have built inventory to satisfy a modest rebound in Q4 2022,” she explains. “Holiday sales will test the market’s resilience and its ability to absorb premiums. Lower GDP growth expectations in 2023 will limit market needs and slow herd-rebuilding efforts.”
Here’s a look at other uncertainties on analysts’ minds:
- Trade prospects remain steady, despite growing uncertainty
“Pork shipments to most markets through Q3 2022 were relatively strong, with local supplies insufficient to satisfy demand in key markets in South Korea, Japan, and Mexico. Disappointing shipments into China and a lack of clarity around the prospects for improvement given ongoing Covid-related restrictions have forced other markets to absorb the excess,” the report said. “Efforts to stabilize production in some regions have been slow due to productivity challenges and consumer uncertainty, resulting in improved trade prospects for 2023.”
- Challenging 2022 harvest places burden on next Brazilian crop
“Feed costs remain near record levels after a disappointing harvest in the US, parts of Europe and Asia. This is resulting in near-record-low grain and oilseed inventories and historically high prices. The acreage of corn and soybeans being planted in the Southern Hemisphere could help ease, but not eliminate, the strain in 2023,” Rabobank wrote.
- Global growth outlook slows as producers remain cautious
“Historically high global production costs are limiting herd expansion in most regions. With few prospects for cost relief and limited visibility around the strength of consumer demand given the challenging economic environment in 2023, producers have scaled back plans to add to their herds,” the report said. “Global production is expected to fall 2% in 2022 and see almost no material growth in 2023, with production in key growing regions significantly lower.”
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