December 10, 2007

China's output contraction to influence 2007 world pork performance

Global pork production in 2007 is seen to fall by 1 percent to 105.8 million tonnes due to a major contraction of production in China, where the sector was much affected by a massive pig culling following an outbreak of Porcine Reproductive and Respiratory Syndrome Virus (PPRSV) and high feed prices, according to the Food and Agriculture and Organisation.

In South America, an increase in pork production is anticipated in the main producing countries like Brazil and Chile due to its harvested record soy and corn crops. In the European Union, pork production is forecast to grow only slightly in 2007, constrained by rising feed costs and recent outbreaks of swine fever in both Bulgaria and Romania. On the other hand, the Russian Federation is set to expand as pig numbers have increased by more than 10 percent, sustained by government support under policies aimed at boosting domestic production and at lowering import dependency over the medium term. Pork output in Australia may increase in the short term due to a reduction inventories, caused by a combination of drought-induced grain price increases (feed grain accounts for approximately 40 percent of feed input), record imports and the strengthening of the Australian Dollar. Pork output in Canada is likely to decline along with the pig breeding herd, as the processing industry continues to consolidate, also pressured by the strong Canadian dollar.

Outlook for US pork production is favourable as slaughter weights in 2007 are close to those of the previous year, while slaughter numbers are increasing. In North America, pork retail prices have risen, as the sector has been able to pass some of the increase in production costs to consumers.

World trade in pork is estimated to remain in the order of 5 million tonnes in 2007, virtually unchanged from last year. A major development for the sector this year was the coming of China onto the market as a buyer, as the country was crippled by a lack of pork supplies following the outbreak of PRRSV. Among major importers, purchases by Japan are expected to remain at a standstill this year, after declining in 2006. Imports of pork by Mexico are also unlikely to change much this year. By contrast, shipments to the Republic of Korea are expected to increase, sustained by rising domestic demand. Pork deliveries to the Russian Federation, which continue to be subject to tariff rate quotas, are expected to be only marginally higher, a reflection of large production gains and consistent with the prevailing government policy. China (mainland), this year is expected to import 100 000 tonnes of pork, more than double the level in 2006, in an attempt to dampen the pressure for domestic prices to rise. As for pork exports, sales from Brazil and Canada are forecast to rise, partly boosted by increased shipments to China. By contrast, declining exports are now anticipated in the United States, reflecting strong domestic consumption, and in the European Union, depressed by a strong Euro.