Pig production shows the feed price effect


Our annual analysis of global pork production trends considers data pointing to the first downturn for some years


No one should have been surprised that a major international analysis of world meat markets this year has had a complete section devoted to uncertainties. Unprecedented prices for feed grains have created doubts about the continuation of historical patterns and complicated all attempts at forecasting.


From the viewpoint of the pork sector, it had long been clear that 2008 would be a time of adjustments in production to take account of smaller herd inventories. In fact the data now available for 2007 show that some industries around the world were adjusting to the new grain price situation already last year.


Higher grain prices on the world market can be expected to continue for the foreseeable future, suggests the fourth annual Agricultural Outlook paper published jointly by the 30-country Organization for Economic Co-operation and Development (OECD) and the Food and Agriculture Organization of the United Nations (FAO). Looking at the period 2008 to 2017, they predict world meat production will grow on average by 2% per year, although there will be marked differences in growth rates from one region to another. Meat consumption in developing countries (especially those of the Asia-Pacific area) will account for more than 80% of global growth.


But the report available at www.fao.org and www.oecd.org acknowledges those uncertainties in trying to formulate a forecast. It says this year’s Outlook was prepared in an environment characterized by increased instability in financial markets, higher food price inflation, signs of weakening global economic growth and food-security concerns. Five key assumptions were made in reaching its conclusions, relating to biofuel use of grains and oilseeds, petroleum prices, income growth in major developing economies, crop yields and the exchange rate of the US dollar relative to the currencies of all other countries.


Developing countries are expected to dominate production of many agricultural items by 2017. Brazil could hold a 30% share of total world meat exports by the end of the projections. It will figure alongside a small number of major exporters including the USA, Canada, Argentina and Australia as dominant forces in world markets. By contrast, the export share of the European Union is predicted to fall throughout the review period.


Import dependency in meat products should grow in many developing countries as rising demand surpasses the domestic capacity for meat production. Among the developed countries, Russia looks set to remain ahead of Japan as the world’s largest net meat importer by 2017. Worldwide, the changing factors behind supply and demand are forecast to result in commodity prices during the period 2008-2017 being substantially higher than in the last 10 years. Beef and pork prices are forecast some 20% higher, with the price of wheat and maize likely higher by 40-60%.


Coming back to the present and recent past, however, an assessment by FAO has proposed that global pigmeat production in 2008 will increase by almost 2% after a 3% decline in 2007 which was largely the result of culling of pigs in China following that country’s outbreak of PRRS. This year, output in China is foreseen to expand more than 1%.


In South America, an increase in pigmeat production is anticipated in virtually all producing countries for the fourth consecutive year. Argentina, Brazil and Chile, which have ample feed supplies, are the main contributors to the 4% output expansion projected for the region. In Russia, production is set to grow by more than 6% in 2008 as the pig population increases. US pork output could also be higher. But in Canada and the European Union, where output last year was at cyclical highs, production is expected to decline in 2008. Vietnam’s production is also affected by PRSS and culling of infected animals will reduce the national growth in production for 2008.


 

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