Pork: Production in China and Brazil growing

Production in China and Brazil growing

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In Brazil, analysts at the US Department of Agriculture expect a new production record this year.
In Brazil, analysts at the US Department of Agriculture expect a new production record this year.

USA, Washington. The USDA expects a further recovery in production in China this year. Nevertheless, the need for imports remains high.

The Chinese pork market is recovering faster than previously expected. This is also reflected in the current estimates of the US Department of Agriculture (USDA) for the global hog market in 2021. While the Washington experts made only minor changes from the October forecast for most of the countries included in their analysis, the rapid upward trend in China's hog market has prompted them to make major revisions.

In October 2020, US analysts were still predicting that pork production in China would increase by about 3.5 mill. t, or just over nine percent, this year, but are now forecasting an increase of 5.5 mill. t, or nearly 15%, to 43.5 mill. t. The recovery from the losses caused by African swine fever (ASF) is proceeding faster than expected, and the high slaughter pig prices are an incentive for producers to bring in more animals, the ministry's experts explained. Also revised significantly upward was the forecast for pork consumption in China, which fell to its lowest level in more than a decade in 2020 due to ASF and Corona consequences. According to the current forecast, domestic consumption is expected to increase by 4.95 mill. t, or 11.5%, to about 48 mill. t compared to 2020. However, both production and consumption would still remain well below pre-ASF levels.

The USDA currently expects China's pork imports in 2021 to decrease from the previous record year, down 530,000 t or about 10%. However, compared to the October report, US analysts have raised their forecast for absolute import volume by 120,000 t to 4.62 mill. t. This is due to a stronger estimated recovery in consumption in 2021 with fewer Corona issues. Compared to earlier years, this import volume would still be above average.

The corrections made by the USDA due to developments in China also have an impact on the forecast for total global production due to the large weight of the People's Republic. For example, the Americans now expect global pork production in the countries they are looking at to increase by 6.1 percent year-on-year to a total of 103.8 mill. t in 2021. Global consumption is expected to recover at a similar rate, up six percent after a previous slowdown.

US experts expect some normalization of the hog market in the current calendar year as economies recover from the Corona shock and supply chains and out-of-home consumption are expected to function more smoothly again. However, international pork trade is expected to weaken between two and three percent after record volumes in 2020, largely due to China's expected lower import volumes.

ASF hits Philippines hard

While the USDA has revised its forecast for pig production in China upward, it has been noticeably lowered for the Philippines. As a result of the further spread of ASF, pork production there in 2021 is likely to be 20 percent lower than still assumed in October. The current forecast of 1.08 mill. t would be 3.6% below the previous year's result, although there has already been a 30% drop in production in 2020 due to the animal disease. Last year, according to the USDA, a decline in production of 470,000 t in the Philippines was even offset by a 542,000 t drop in consumption because pork imports were also cut back. However, this is expected to increase again by 50,000 t or about one-third to 200,000 t in 2021.

Mexico's import demand, on the other hand, is estimated to be weaker than in October, as the devaluation of the peso and subdued economic development are likely to slow down imports. Year-on-year, Mexico is now expected to see only a small 2% increase in imports to 930,000 t of pork, which also limits sales prospects there for the US as the main supplier.

Brazil is the winner

For its own country, USDA expects a significant slowdown in the long-term growth trend for pork production; it is expected to increase only 1% over 2020 to 12.96 mill. t. December livestock census results, showing a three percent year-over-year decline in sow numbers, also point to an end to previously dynamic growth in hog production. China's likely lower import demand is also expected to hit US exporters, but the Department's projected export decline of 1.9% is comparatively moderate.

For the European Union, on the other hand, exports are expected to drop more significantly. USDA estimates Community third-country sales, including the United Kingdom, at 4.10 mill. t excluding byproducts in 2021; that would be 250,000 t, or 5.7%, less than in the record year of 2020. Contributing to this, in addition to the loss of many third-country markets for Germany, is the fact that pork production in member states is expected to remain unchanged at just over 24 mill. t, but about 300,000 t more pork is expected to be needed for domestic consumption to pick up.

A winner in the global pork market in the new year is likely to be Brazil, according to Washington analysts. Production there is expected to rise three percent to a record 4.25 mill. t, according to the latest USDA forecast, while domestic pork sales are expected to increase 2.6% and exports 4.4%.

Source: fleischwirtschaft.de; AgE