No one should have been surprised that a major international analysis of world meat markets this year has had a complete section devoted to uncertainties. Unprecedented prices for feed grains have created doubts about the continuation of historical patterns and complicated all attempts at forecasting.
From the viewpoint of the pork sector, it had long been clear that 2008 would be a time of adjustments in production to take account of smaller herd inventories. In fact the data now available for 2007 show that some industries around the world were adjusting to the new grain price situation already last year.
Higher grain prices on the world market can be expected to continue for the foreseeable future, suggests the fourth annual Agricultural Outlook paper published jointly by the 30-country Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organisation of the United Nations (FAO). Looking at the period 2008 to 2017, they predict world meat production will grow on average by 2% per year, although there will be marked differences in growth rates from one region to another. Meat consumption in developing countries (especially those of the Asia-Pacific area) will account for more than 80% of global growth.
Uncertainties surround forecasts
But the report available at www.fao.org and www.oecd.org acknowledges those uncertainties in trying to formulate a forecast. It says this year's Outlook was prepared in an environment characterised by increased instability in financial markets, higher food price inflation, signs of weakening global economic growth and food-security concerns. Five key assumptions were made in reaching its conclusions, relating to biofuel use of grains and oilseeds, petroleum prices, income growth in major developing economies, crop yields and the exchange rate of the US dollar relative to the currencies of all other countries.
Developing countries are expected to dominate production of many agricultural items by 2017. Brazil could hold a 30% share of total world meat exports by the end of the projections. It will figure alongside a small number of major exporters including the USA, Canada, Argentina and Australia as dominant forces in world markets. By contrast, the export share of the European Union is predicted to fall throughout the review period.
Import dependency in meat products should grow in many developing countries as rising demand surpasses the domestic capacity for meat production. Among the developed countries, Russia looks set to remain ahead of Japan as the world's largest net meat importer by 2017. Worldwide, the changing factors behind supply and demand are forecast to result in commodity prices during the period 2008-2017 being substantially higher than in the last 10 years. Beef and pork prices are forecast some 20% higher, with the price of wheat and maize likely higher by 40-60%.
Coming back to the present and recent past, however, an assessment by FAO has proposed that global pigmeat production in 2008 will increase by almost 2% after a 3% decline in 2007 which was largely the result of culling of pigs in China following that country's outbreak of PRRS. This year, output in China is foreseen to expand more than 1%.
In South America, an increase in pigmeat production is anticipated in virtually all producing countries for the fourth consecutive year. Argentina, Brazil and Chile, which have ample feed supplies, are the main contributors to the 4% output expansion projected for the region. In Russia, production is set to grow by more than 6% in 2008 as the pig population increases. US pork output could also be higher. But in Canada and the European Union, where output last year was at cyclical highs, production is expected to decline in 2008. Vietnam's production is also affected by PRSS and culling of infected animals will reduce the national growth in production for 2008.
What this all means for the global trend in production of pork can be seen from the chart in Figure 1. Last year, we could refer to pigmeat production worldwide as evidently remaining in growth mode. It had risen by almost 15% in the period 1990-1995 and by 12.5% in 1995-2000, before recording a further increase of over 19% between 2000 and 2006.
At first it seemed the pattern would continue in 2007, with forecasts of another 3% rise taking the world total that approached 110 million tons. In the end the reality was that output slipped back so that it was less in 2007 than in 2005 and 2006 as those feed-led adjustments started to take effect.
Regional trends are illustrated by Table 1. The first point to note is that this gives a world total last year that is even lower than our opening chart had indicated. Some reports from FAO suggest that under 99 million metric tons of pork were produced in 2007. That would be down by as much as 7.5% from the 2006 level. The figure of approximately 100.5 million tons put forward as likely for 2008 would be an annual increase of about 1.8%.
How regions have differed
But the Table makes clear that the changes in output differed from one region to another. Indeed, the only major decrease between 2006 and 2007 took place in the Asia-Pacific area as a combination of disease, feed costs and bad weather hammered Asian industries. Europe registered a slight increase and there were more significant rises in North America, Latin America and Africa.
The same dataset also gives a glimpse into the effects on regional trading patterns in pigmeat. Asian countries imported more and exported considerably less. The reverse was true for European states. Total exports from North America decreased because although the USA was setting new records for the amount it sold to other places, this was more than counterbalanced by the loss of markets experienced by Canada due to the strength of the Canadian dollar.
Even so, the Asia-Pacific region still can claim to provide almost 54% of all the pork produced worldwide. This compares with about 27% for Europe, 12% for North America, 6.5% for Latin America and 1% for Africa.
However, we should always remember that the apparent Asian share is greatly inflated by including China. In 2007 it was true once again that the People's Republic of China accounted for almost 44% of world pigmeat production.
Our annual listing of the Top 20 countries for quantity of pigmeat produced per year (Table 2) confirms a view that China's output seems to have fallen from around 49 million metric tons in 2006 to nearer 44 million tons in 2007, although a recovery to 44.7 million tons is already being projected for 2008.
As usual, the order in which we have listed the countries is according to their production volume in the most recent year in this case, 2007. It has brought a few changes in the middle and lower levels of the list. Compared with the Table we published a year ago, Russia moves up one place ahead of Canada and the Netherlands overtakes both Japan and the Philippines. PIGI