Pork Global market overshadowed by epidemics
The effects of African swine fever (ASF) and the corona pandemic have left their mark on the international pig market this year, bringing global production and consumption down to multi-year lows. This is mainly due to market developments in China. On the other hand, the high import demand of the country has pushed world pork exports to new record levels and has recently led to significant increases in pig prices for export-oriented countries such as Brazil, the United States and Canada. Corona and the ASF are predicted to continue to have a significant impact on the markets in 2021, although specific forecasts are subject to a high degree of uncertainty due to the uncertain course of the diseases and their consequences.
Recovery in out-of-home consumption
The US Department of Agriculture (USDA) expects some normalisation of the pig market in the coming calendar year, as economies recover from the corona shock and supply chains and out-of-home consumption are expected to function more smoothly again. According to the Washington experts, pork production is expected to increase again in the Asian countries affected by ASF, especially in China, where production is expected to increase by a good 9% to 41.5 mill. t. Improved self-sufficiency will reduce global import demand and lead to lower export prices, according to the USDA.
The EU Commission has also dared to make a forecast. However, this is rather pessimistic for the most important EU pork exporter due to the first appearance of the ASF in wild boar in eastern Germany and the resulting loss of third country markets. Both EU production and exports are expected to fall in 2021, with only consumption expected to increase slightly.
(Bild: imago images / VCG)
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Production in Europe will also fall in 2021
Specifically, the EU Commission is currently assuming that pork production in slaughterhouses in the 27 member states will fall by 0.5% to 22.88 mill. t this year compared to 2019, as lower production in Italy, Germany, Poland, Bulgaria and Romania, among others, cannot be offset by increases in Denmark and Spain.
For 2021, the volume is forecast to fall by 1% to 22.65 mill. t. The Commission does not provide any justification for this, but the low pig prices in some countries, notably Germany, are unlikely to encourage the producers concerned to increase production. The USDA is more optimistic, however, and forecasts a moderate increase in production of 0.6% for the EU in 2021.
In the case of EU pork exports, which in the first half of the year were still 15% higher than in the same period last year, the Brussels Commission is expecting an increase of only 2% to 4.26 mill. t for 2020 as a whole. The reason is that the loss of German third-country deliveries due to ASF cannot be compensated by other Member States. Next year, exports are then expected to fall significantly, by ten percent to 3.83 mill. t, especially as China is likely to import less goods. A possible regionalisation for German exports could ease the situation, but a hard Brexit could push export volumes even further into the red, according to the experts. Looking ahead to 2020, the USDA still expects pork exports to the EU to increase significantly - albeit without by-products – by 8.5%; next year a decline of "only" 2.5% is forecast.
Consumption in Europe is recovering
According to estimates by the EU Commission, average per capita consumption of pork in the 27 Member States will fall by 400 g or 1.2% to 32.8 kg this year. In addition to the long-term downward trend in consumption, this also reflects the corona-related decline in pork consumption in the out-of-home segment, which was not fully offset by increased purchases in supermarkets. Next year, however, domestic demand is expected to improve again and per capita consumption is expected to increase by an average of 300 g to 33.1 kg. This assumes, however, that there will be no further lockdowns and no closures of restaurants, canteens or hotels, as is already the case in some EU countries.
It should also be noted that experience shows that a prolonged economic recession has a negative impact on meat consumption, with the more expensive beef being more affected. In its forecast, the EU Commission makes no mention of the price prospects on the pig market. However, it must be assumed that prices for pigs and their meat in Germany will remain below average in the longer term due to the loss of exports to third countries, and that this will have an impact throughout Europe. However, lower consumer prices should in turn stimulate intra-Community demand.
(Bild: Imago Images / Christine Roth)
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Zero-sum game in world trade
The outlook for the global market is somewhat different. The USDA expects pork consumption to grow again in 2021, rising by 4.2 mill. t or 4.3% to 101.65 mill. t in the countries included in the forecast compared to the Corona crisis year 2020. This is mainly due to the 7.4% increase in consumption predicted for China, to 45.88 mill. t. However, pork consumption is also expected to rise again in all other countries, albeit at a more moderate rate.
In China pork production is also forecast to rise by almost ten percent or 3.5 mill. t, which is higher than domestic demand. This would reduce the need for imports and lead to a drop in imports of around 300,000 t or a good 6% to 4.5 mill. t. However, this would still be a rather large quantity; in 2017 and 2018 Chinese pork imports would amount to around 1.5 mill. t. As far as world trade is concerned, Washington analysts expect a kind of zero-sum game: According to the USDA, what China imports less will be offset by higher demand in other countries such as Japan, Mexico, South Korea or the Philippines. For its own country, the ministry expects pork imports to grow by 8.6% to 429,000 t, which would make up for the slump this year.
Exports expected at a high level
With regard to world exports of pork, the US Department of Agriculture expects pork exports in 2021 to remain at the high level of this year, estimated at 10.8 mill. t, despite the expected decrease in Chinese imports. The global recovery in demand to overcome the Covid-19 problems and an economic recovery are expected to boost demand for pork in many countries. Brazil and Mexico are expected to benefit in particular, as growing domestic production will allow them to expand their exports by between four and five percent compared to 2020 according to USDA forecasts.
However, higher export volumes are also expected from the emerging economies of Russia, Argentina and even China. In the United States itself, on the other hand, pig production, which is expected to grow only moderately, will limit additional sales abroad, although these are expected to be close to this year's record level of 3.33 mill. t in 2021. In addition to the EU, Canada is also expected to see a decline in pork exports in the coming calendar year. However, Canada is expected to record pork exports in 2020 due to increased deliveries to the US, which has experienced a shortage of supply due to corona-related slaughterhouse closures, and the USDA does not expect this peak to be repeated in 2021.