Weak economic growth is taking its toll on global pork consumption. According to the latest Rabobank quarterly pork report, despite early signs that the worst of the inflationary impact may have already passed, the lagged impact on consumption is likely to be felt throughout 2023.
Pork remains well-positioned, as demand for the protein is historically less income-sensitive than more expensive proteins like beef and premium seafood.
“Nevertheless, we see persistently high retail prices limiting consumption of all proteins. Consumers continue to conserve capital by shifting everyday purchases to lower-value protein options, switching channels, and moving to smaller pack sizes,” says Christine McCracken, senior analyst – animal protein at Rabobank.
In 2022, the industry optimism following a notable upward shift in pork consumption (and prices) in some markets and the expectation of a 2023 recovery of pandemic-restricted consumption in others contributed to planned supply growth in 2023 that will take time to curb, the report points out.
“Slowing supply in Europe will help balance the industry, yet high costs of production and limited consumer support will require a more conservative approach to production to stabilize margins,” McCracken explains.
A modest improvement in production costs is expected in 2023, but the report notes local conditions will vary and risk management will remain critical to success. Global feed stocks are at historically low levels, and availability remains tight. Rabobank expects the small global cushion in grain and oilseed stocks to drive additional feed cost volatility in 2023.
Source: Rabobank
The war with African swine fever (ASF) continues throughout the world and recent outbreaks in commercial operations in China, South Korea, the Philippines and Europe are raising concerns of lower availability and trade interruption. Market reactions to ASF outbreaks remain most disruptive in China, given its large hog population.
“Concerns about new losses drove proactive farmer culling in late 2022 and continue to affect the rate of restocking in early 2023. Losses appear contained and remain regional, however, which should limit market impact. Currently, global pork supplies appear sufficient, though a sizable shortfall in China due to disease would disrupt the global industry and drive a sharp upward correction in pork prices,” Rabobank explains.
In other regions, improvements in biosecurity, genetics and herd health are beginning to boost productivity. Herd health is improving in many other markets as the impacts of porcine reproductive and respiratory syndrome (PRRS) and porcine epidemic diarrhea virus (PEDv) begin to abate, the report says.
“Improved productivity in the U.S. and Mexico is expected to bring added supply and could potentially burden the market,” McCracken writes. “Given the difficulty in eliminating these viruses, operations with ongoing disease challenges may exit the industry given depressed returns.”
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