Global market review: World pork output continues upward trend

The general upward trend in world pork output is confirmed by the latest global market review compiled exclusively for Pig International.

World pork production continues to show impressive growth year by year. Over the past 12 months, greater sow productivity and higher marketing weights have compensated for various ravages due to disease and for a near standstill in farm inventories at a time of economic uncertainty.

The general upward trend in output is confirmed by the latest global market review compiled exclusively for Pig International and its website at WATTAgNet.com. In 2015, it seems that the volume of pig meat produced worldwide will exceed 119 million metric tons -- another new record, up from 117 million tons in 2014 and 115 million tons in 2013.

Ten-year forecast

Since 2000, therefore, world production is indicated to have grown by 28 percent. The trend is illustrated by our accompanying Figure 1, which takes data for the period 1995 to 2015 as reported by OECD-FAO and extends their extrapolations to the next 10 years. The indication from this is that we remain on course to produce 130 million metric tons of pork annually by the year 2025.

The challenge will be to avoid exceeding the demand for the meat. Although rising populations and better disposable incomes still fuel increases in consumption for pork as for other meats, experience during 2014 has shown a change to weaker economic growth in many countries. Purchases of meat to consume at home or in restaurants have been less vigorous as a result, leading to a supply-demand imbalance that has often depressed farm prices for pigs and dented producer profitability.

Last year, the risk of oversupply was averted by cutbacks in inventory as profits tumbled. In several cases, the national output of pork was also reduced by pig deaths and production losses caused by outbreaks of serious diseases, among them some long-known infections such as the African swine fever virus and relative newcomers including a more virulent porcine epidemic diarrhea (PED) virus.

Output hit by China downturn

Figure 2 provides a reminder that the Asia-Pacific area is by far the largest regional contributor to global pork volumes -- due entirely to the inclusion of China, of course. A recovery of global pork supplies does seem to be taking place in 2015 after last year’s poor margins and health issues, as producers respond to better pig prices and relatively low feed costs. But the extent to which this will be reflected in the annual world tonnage depends on what happens in China.

Always influential on global data as the world’s largest pork producer, China is having a particularly large effect on changes in international supply levels at present because of a temporary end to its own production growth, after many of its sows were culled in 2014.  From early signs, the Chinese total in 2015 may be no more than, or even slightly below, the 56.7 million metric tons produced by the industry in 2014.

China’s dominant place at the top of the 20 largest pork-producing countries in 2014 is demonstrated by the data in Table 1. In round terms, China alone accounted for 49 percent of all pig meat produced globally last year. The other 19 countries on the list contributed a combined total of 46.31 million metric tons, approximately equivalent to another 40 percent of the global supply.

Although only seven of the Top 20 players produced less pork in 2014 than in 2013, when China’s tonnage is excluded the aggregated volume from the other 19 countries last year was up by less than 0.3 percent.

Questions of inventory

At one time, FAO commentators were forecasting that 2015 would be the first year when the global on-farm inventory of all pigs reached one billion, or about double the number of animals on farms in the 1970s.

Preliminary data suggest that this threshold level will not now be achieved in the current year, although it remains a possibility for 2016.

Our exclusive market review is the only global survey that looks in detail at the number of breeding sows in the main producing countries. Table 2 checks the inventory in 30 countries and gives them a total of slightly over 81 million sows. Although no clear estimate is possible for the world sow population in 2014, the herds of the top 30 probably represent approximately 60 percent of all sows worldwide.

The key indicator from the table is that the top-30 total declined by nearly 5 percent in 2014. Again, the analysis must begin with the China factor. Chinese breeding sites are shown by these data to have lost 4.35 million sows in the 12 months to the end of 2014 as poor producer profits forced a major downsizing of the national herd.
Recent reports have said that the culling of sows nationally has continued into this year, not least by China’s backyard producers. Official data at the start of 2015 put the national inventory at only 41.9 million sows and within another three months this had fallen to less than 40.5 million. It would be the lowest number of sows in China since 2003 and theoretically could reduce the country’s pork production in 2015 to just 45.5 million metric tons unless productivity performance improved.

Productivity of the top three producers

At world level, the three biggest pork producers are China, the 28-country European Union and the United States. China’s production of 56.7 million metric tons in 2014 compared with 22.4 million tons from the EU-28 and a U.S. output of about 10.4 million tons.

See in Figure 3 how the combined annual breeding inventory of these three players has trended since 2000. The trend line of their composite total sow numbers on the chart illustrates that a series of increases until 2009 has been followed by a decline in recent years. But in fact the apparent rise at the start of the decade was all due to Chinese expansion, as the separate datasets for the three players show in Figure 4.

EU sow numbers dropped from 16 million to 14 million between 2000 and 2009 before falling again to a little over 12.5 million in 2014. An American total of 6.3 million sows in 2000 had become 5.9 million in 2009 and remains approximately 6 million today. By contrast, China began the decade with 36.5 million sows and increased this to 49.1 million in 2009, rising again to 50 million in 2013 although then decreasing to under 46 million last year.
Productivity changes have differed greatly, however. From 2009 to 2014 the EU-28 member states grew their pork production by 4.9 percent from 21.36 million metric tons to 22.1 million tons despite having 10 percent fewer sows. U.S. output over the same period stabilized at approximately 10.4 million metric tons per year as sow numbers hardly changed. But the production growth of 16 percent for China, from 49 million metric tons to 56.7 million tons, came while the country was expanding its inventory by one million sows or approximately 2 percent.

The year 2014 in China saw 730 million meat pigs produced for slaughter. According to Table 2 data, the year had started with a Chinese on-farm inventory of 50.4 million sows. In other words, an average is indicated of approximately 14.5 pigs marketed per sow per year.

Final data for the EU-28 pork scene in 2014 showed slaughterings of 248 million pigs, while member states had begun with 12.51 million sows, so pointing to a rough average of 20 pigs sold per sow. Similarly, an average of 19.7 pigs per sow can be calculated for the U.S. in 2014 from U.S. Department of Agriculture (USDA) reports that 113.6 million pigs were marketed from 5.76 million sows.

Consumption outlook

When weak economic growth limits demand, it can become a case of productivity versus prices if meat supplies keep rising despite stable or reduced inventories on animals on farms. Unusually, the prospects for pork demand in 2015 look more positive in the mature markets of Europe and North America than in the emerging territories of other regions.

In 2014 the amount of pork consumed in the European Union area worked out at about 31 kilograms per person per year. A modest increase in the current year has been forecast by sources in Europe that point to abundant supplies and improved buying power for consumers. Meanwhile in the U.S. the predictions focus on more pork being produced, consumed and exported.

An assessment from the USDA in October 2014 said 10.86 million metric tons of pig meat could be produced in the U.S. in the 12 months to September 2014 due to the cumulative effects of having more sows, continuing improvements in productivity and relief from the health problems of the PED virus suffered last year. This volume would, USDA commented, be enough to see the national output of pork exceed that of beef for the first time in more than 60 years.

It is possible that less pork will be exported globally in 2015 than in 2014 so that the pressure will stay on prices in the main centers of production. But expecting pig prices to stay low for the rest of this year is starting to look too gloomy. The demand side of the market balance has improved recently in several parts of the world and that should be more than enough to accommodate the amazing ability of the world’s pig industries to keep producing more pork.

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