The North American pork market is undergoing a period of rebalancing, as producers grapple with challenging margin outlooks and the need for strategic adjustments in response to economic factors, explains experts at Rabobank in a recent Global Animal Protein Outlook. Here's a look at Rabobank's key trends, projections and potential opportunities for pork producers in 2024.

Decline in Pork Production: Addressing Challenging Margins

The outlook for North American pork production in 2024 suggests a modest contraction in breeding herds, driven by lagging hog prices in comparison to rising production costs, the report notes. After experiencing exceptional losses, primarily due to high raising costs and the closure of small-scale processing facilities, producers are making strategic decisions to rebalance their operations.

Raising costs remain historically high, and global pork demand is showing limited improvement, leading to continued pressure on margins, the report adds. Despite an expected moderation in feed expenses in 2024, alignment of supply and demand is crucial for sustained industry growth.

Sow Herd Reduction Impact on Industry Growth

The reduction in sow herds is anticipated to slow industry growth in the coming year, says the report. However, amidst these challenges, there is a silver lining in the form of productivity gains. Recent improvements in herd health, particularly in response to pressures from PRRS and PEDv, have led to enhanced productivity and livability in many regions of North America. These gains are expected to partially offset the drop in the breeding herd, contributing up to 4% to pork supplies in 2024. Producers, therefore, face the delicate task of managing supply reduction while capitalizing on increased productivity.

Modest Decline in Pork Production: Regional Variances

Rabobank projects a 0.6% drop in North American pork production in 2024. While larger cuts are expected in U.S. and Canadian production, Mexico anticipates a 1.6% year-over-year increase. Producers in each region must carefully navigate these fluctuations, considering both domestic and international market dynamics.

Pork Trade Dynamics: Volatility and Stabilization

North American pork exports are positioned to remain volatile in 2024, influenced by rising political tensions and an uncertain economic forecast. However, some stabilization is expected in Mexican and Canadian pork exports, following estimated declines of 9% and 7% year-over-year, respectively. U.S. exports are likely to see a modest uptick (+3% year-over-year in 2024) after a strong 2023, the report explains.

Importance of North American Trade Alliance

Trade within North America remains critical, with Canada relying on the U.S. and Mexico for 41% of its pork exports and the U.S. shipping 42% of its supply to its North American partners. While China, Japan and South Korea are important markets for North American pork, the strength of the North American trade alliance cannot be overstated. Mexico has improved its North American trade, sending 17% of its pork exports to the U.S.

Despite the potential gains in Japan and South Korea due to improved access and lower-cost pork supplies from Canada and Mexico, challenges such as large supplies of Chinese pork and foreign exchange weaknesses may impact overall market dynamics. Producers should stay informed and agile in their strategies to navigate the complexities of the evolving pork market in 2024.