October 1, 2012

US and Russia droughts may affect world pork supply

Record droughts in the US and Russia may affect the world's pork and bacon supply next year.

Across Europe, swine herds are shrinking. Ireland's farmers cut their herd by 6.6% in the 12 months to June this year, Denmark's fell 2.3%, Germany, Europe's largest pork producer, cut back 1.3% and there were cuts in countries including Spain, France, Italy, Hungary and Poland.

In the US, the cost of bringing home the bacon has almost doubled since 2006, according to economist Steve Meyer at Paragon Economics, and an adviser to the National Pork Producers Council. Consumption is falling as less pork is produced and prices rise, down from 50.8 pounds per person per year in 2007 to a predicted 44.16 pounds next year.

"It's not that people don't want to eat pork, it's just that they increasingly can't afford to," said Mr Meyer. "We've been warning about this for years. Now that we are talking about bacon, we've really got everyone's attention."

US pork producers have been hit as corn and soy prices have soared following this year's drought. Livestock farmers blame a US government mandate that 10% of the US's fuel supply must come from corn-based ethanol for propping up sky high prices. The average cost of producing 100 pounds of pork was US$52.76 between 1999 and 2006, said Mr Meyer. Next year, he expects it to top US$100.

Dr Zoë Davies, general manager of the National Pig Association in the UK said US corn prices and the impact of the ethanol subsidy were being felt worldwide. "We are competing in a fierce global market for feed," she said.

Dr Davies said 7,000 extra pigs per month were now being slaughtered in the UK by farmers looking to get out of pork production. By the end of the year, she expects an extra 35,000 sows to have been killed early. "The market will sort this out, people will go out of business, there will be less pork products and prices will rise," she said.

Mr Meyer said one person who might be pleased about rising bacon prices was Mrs Michelle Obama, a champion of health eating.

"I'm not much for conspiracy theories but if people are eating less meat, that's a good thing as far as they are concerned," he said.