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LIVESTOCK AND POULTRY
World Markets and Trade
October 1997
Swine and Pork
Disease outbreaks in the Netherlands and Taiwan have prompted further expansion in hog inventories in several key countries. EU hog inventories are at their lowest levels in recent history as other EU countries attempt to fill the gap left by the Netherlands in supplying live hogs to the internal EU pork processing market. The shortfall left in the Japanese market from the FMD outbreak on Taiwan has been partially filled by larger than expected Japanese pork production and a reduction in pork stock, dampening total pork imports for the year.
Overview
Hog inventories for selected countries in 1997 were at 792.1 million head, up 1 percent over 1996. This is the lowest rate of increase that has occurred over the last several years, partially due to high grain prices in 1996. Hog inventories expanded in the traditional hog producing areas of China (3 percent), EU (2 percent), and Canada (1 percent), as well as in less traditional countries such as the Philippines (8 percent), Hungary (5 percent), and Romania (3 percent). Some contraction in hog inventories was seen in Russia (14 percent), Poland (13 percent), Mexico (8 percent), and the United States (4 percent). However, this was prior to the hog cholera and Foot and Mouth Disease (FMD) outbreaks currently affecting herd size in the Netherlands and Taiwan, respectively. By the beginning of 1998, hog inventories will have adjusted to these disease outbreaks, prompting a 1 percent increase in total hog inventories, mainly from expansion in the United States, Canada, and China. Prospects appear good for an even larger inventory in 1999 since expansion is expected to continue throughout 1998.
Image: Hog Inventories in Selected Countries
Pork consumption for selected countries in 1997 is expected to reach a record 80.0 million tons, up 2 percent from 1996 due to lingering consumer concerns over BSE and renewed concern over recent E. coli outbreaks. The largest increases in consumption are expected to occur in the Philippines (6 percent), China (5 percent), Korea (5 percent), Hungary (4 percent), the United Kingdom (2 percent), and Mexico (1 percent). Declines are expected in Poland (10 percent), Russia (8 percent), Taiwan (4 percent), Germany (4 percent), Japan (2 percent), and the United States (1 percent). Pork consumption in 1998 is forecast to reach a record level of 82.4 million tons, an increase of 3 percent from 1997.
Pork exports for selected countries are expected to decline in 1997 after reaching record levels in 1996. Total exports in 1997 will only reach 2.4 million tons, down 8 percent from 1996 as the world's largest pork exporting country, Taiwan, was forced out of the market in March 1997 due to FMD. Pork exports from Taiwan dropped to 69,000 tons in 1997 from a record high level of 388,000 tons in 1996. In addition, Chinese pork exports are expected to decline in 1997 to 150,000 tons, down 22 percent from the previous year. These large declines in pork exports are not expected to be offset by substantial increases from the United States (12 percent), Canada (7 percent), and the EU (6 percent). For 1998, pork exports are forecast to decline 2 percent and total 2.3 million tons. Declines are forecast for the EU and China, and will not be offset by further increases from the United States and Canada.
United States
Beginning 1997 hog inventories were 56.2 million head, down 4 percent from 1996. Herds expanded in 1997 in response to favorable producer returns during the past year. Feed grain prices have been below the high level of a year ago during the first three quarters of 1997, cutting production costs. Hog prices peaked at about $60/cwt in mid-May, but slipped to the mid $40/cwt by mid-October. Beginning 1998 hog inventories are forecast at 60.3 million head, up 7 percent from 1997.
After a dramatic increase in live hog imports from Canada in 1996, the flow for 1997 has moderated. Total live hog imports are expected to reach 2.9 million head in 1997, an increase of 4 percent over 1996, a much slower rate of increase than the 59 percent rate seen in 1996. This slowdown in Canadian hog imports is due to the continued expansion of the Canadian pork processing industry. The Taiwanese FMD outbreak is causing a major shift in where Japanese pork imports originate. Canadian pork processors recognize this as an opportunity and are aggressively bidding for hogs that are normally destined for the United States. Prospects for 1998 point to a reduction in live hog imports from Canada, with a total of 2.5 million head imported, a 11 percent reduction over 1997. U.S. exports of live hogs to Mexico are expected to decline 3 percent to 53,000 head in 1997 as more hogs are retained for the U.S. market. A further reduction to 50,000 head is forecast in 1998.
Pork production in 1997 is expected to be virtually unchanged from last year at 7.7 million tons. Although hog slaughter is expected to decline 1 percent in 1997, dressed weights are averaging higher than last year. In addition, hog producers are retaining more hogs to expand their herds, leaving fewer animals available for slaughter. Pork production is forecast at 8.4 million tons in 1998, an increase of 9 percent over 1997.
U.S. pork exports in 1997 have not increased as much as previously forecast because of stiff competition and consumer preferences in the Japanese market. Analysts previously expected U.S. pork to be readily accepted by Japanese consumers; however, this has not been the case as Japanese importers have scoured the world looking for suitable pork supplies. In addition, Japanese pork stocks were at record high levels during the late spring and early summer, prompting importers to cut back on orders for the remainder of the year. U.S. pork exports are now expected to reach 483,000 tons, up 12 percent from 1996. A slowdown in the rate of growth for U.S. pork exports is forecast in 1998, with exports totaling 522,000 tons, up only 8 percent from 1997.
Japan continues to be the number one market for U.S. pork, accounting for 54 percent of all U.S. pork exports by volume and 67 percent by value. Part of the reason sales to Japan have not increased as expected is due to high carryover of pork stocks from the large surge in imports in 1996. Over the course of 1997, these stocks have declined but still remain at a relatively high level, accounting for 12 percent of consumption. Normally, stocks account for 5-7 percent of pork consumption. Once pork stocks return to normal levels, pork imports should increase.
Canada remains the number two market for U.S. pork in 1997, as Canadian processors increase their exports. Meanwhile, exports to Mexico are performing well this year, much improved over 1996 as Mexican income levels continue to increase. Pork exports to Russia and Korea have improved over 1996 as U.S. pork prices have moderated, drawing Russia back to U.S. product. The liberalization of the Korean frozen pork market in July 1997 is also expected to attract more U.S. pork.
U.S. pork imports in 1997 are expected to be virtually unchanged from last year at 801,000 tons. A slight decline is forecast in 1998 as prices moderate due to increased domestic production. A shift in market share continues as Canada picks up more of the U.S. market from the EU, particularly Denmark. This trend is expected to continue as higher prices elsewhere draw more pork away from the U.S. import market.
Canada
Image: U.S. Pork to Canada Up Sharply as Canadian Pork Is Drawn to Asia
After a slowdown in hog inventory expansion during 1996, Canadian hog production accelerated in 1997, largely because of lower grain prices and favorable hog prices in 1996 and most of this year. Prices during the first half of 1997 have averaged 3 percent above the average 1996 price of C$1.85, and are expected to remain at this level for the remainder of 1997. Prior to 1996, hog inventories had been growing at an average rate of 2 percent per year. In 1997, the beginning hog inventory was at 12.1 million head, less than 1 percent above 1996. Inventories in 1998 are forecast to return to the 2 percent growth rate, totaling 12.3 million head. New export opportunities for Canadian processors will help spur on growth in hog inventories. Virtually all of the herd expansion is occurring in the Prairie provinces, particularly Manitoba and Alberta. Two Prairie processors have expanded production with either new plants or renovation of existing facilities, while a Taiwanese processor has announced plans to build a medium-sized plant in Alberta.
Pork production in 1997 is expected to rebound after the decline in 1996 and total 1.3 million tons, an increase of 1 percent. An increase of 3 percent is forecast for 1998. A continuation of moderate increases in Canadian pork production are expected over the next several years as Canadian processors strive to compete in the world pork export market.
Pork exports have continued to increase in 1997 and are expected to reach 395,000 tons, an increase of 7 percent over 1996. Prospects for 1998 are strong as exports are forecast to total 430,000 tons, up 9 percent from 1997. Much of this export increase is a result of continued growth in Asia, particularly Japan and Korea. The FMD outbreak in Taiwan has created opportunities for Canadian packers, who are able to prepare pork cuts specific to their customers needs. However, export volumes to the United States, Canada's largest export market, are declining. In 1996, the United States represented 64 percent of total Canadian pork exports. In 1997, that percentage is forecast to decline to roughly 55 percent, a reduction of 14 percent. This trend is expected to continue in 1998 as Canadian processors divert more product for export to the Asian market.
As Canadian pork exports have increased, Canadian pork imports have also risen, particularly from the United States, as processors short the domestic market to supply the lucrative export market. Canadian pork imports in 1997 are expected to reach 50,000 tons, an increase of 28 percent over 1996. Although a much smaller percentage of the total trade picture, this growing market for U.S. pork in Canadian markets is expected to continue as consumers become more familiar with the quality of U.S. products.
Canadian live hog exports are expected to reach 2.9 million head in 1997, a decline of 4 percent from 1996. An 11 percent reduction in hog exports is forecast in 1998 as packer expansion in Western Canada bids hogs away from their U.S. counterparts. Canadian hog imports from the United States have been fairly stagnant over the years due to pseudorabies. A proposal for the resolution of this problem was proposed several years ago by the Canadian government but with no forward progress until this year. The long awaited pseudorabies regulatory proposal was published in the Canada Gazette, their version of the U.S. Federal Register, on June 14, 1997 and would allow for the importation of U.S. hogs for immediate slaughter. Currently, U.S. slaughter hogs are prohibited entry into Canada unless they meet a strict 30-day quarantine measure for this disease. This current quarantine measure effectively prevents Canadian packers from importing U.S. slaughter hogs. Under the proposed measure, U.S. slaughter hogs from certain states would be permitted.
Mexico
The rate of decline in hog inventories in Mexico has slowed as economic conditions continue to improve. Beginning inventories in 1997 declined 8 percent from 1996 to total 10.2 million head. A 2 percent reduction is forecast for 1998 as producer returns improve. Many small hog producers are being forced out of the market by stricter government ecological regulations, but stronger hog prices are prompting an expansion by the vertically integrated producers.
As a result of the improving Mexican economy, pork imports in 1997 are expected to increase 33 percent, to 40,000 tons. A large part of this increase is being utilized by Mexican sausage producers. The United States= share of the Mexican pork market in 1997 is expected to remain near its 1996 share of 97 percent. The level of pork imports in 1998 is forecast to remain largely unchanged from 1997.
Mexican pork exports, especially to the United States, are forecast to increase to 20,000 tons in 1997 and 30,000 tons in 1998 as the State of Sonora was declared free of hog cholera on July 8, 1997. It is not known at this time if any pork has been imported into the United States from Mexico. Although this was a major breakthrough for Mexican pork producers, expectations for pork exports outside of NAFTA are expected to improve because of increased demand in Asia as a result of the FMD crisis in Taiwan.
Japan
Japanese pork production is forecast at 1.3 million tons in 1997. This is an upward revision of 1.6 percent from earlier estimates. Domestic production has performed better than initially anticipated due to strong prices stemming from 12 months of protection against competing imports under the safeguard mechanism and the FMD outbreak on Taiwan. Loin prices have been particularly strong as Japanese retailers have looked to local producers as well as foreign producers to substitute for the loss of Taiwanese fresh pork. In 1996, Taiwan exported 86,000 tons fresh pork to Japan, followed by the United States at 77,000 MT. With prices expected to remain strong and supplies of suitable fresh pork tight, domestic production is projected to remain stable at 1.3 million tons in 1998. While the FMD situation has slowed the rate of decline in Japanese pork production, it is not expected to reverse the overall trend.
Pork consumption in 1997 is forecast only 1.6 percent below last year. Strong prices, sluggish sales of table pork and pork hams in both the retail and food service, and rebounding interest in other meats such as beef softened demand slightly. Pork consumption is expected to be flat next year.
Pork imports are forecast to decline to 728,000 tons, down 20 percent from the USDA's earlier estimate of 907,000 tons, and down 22 percent from 1996. Through August, fresh/chilled and frozen imports are off by 27 and 29 percent, respectively. On a volume basis, frozen imports account for nearly 120,000 MT of the overall decline.
Frozen imports have fluctuated according to the vagaries of Japan's gateprice and safeguard system for pork. When imports exceed the safeguard trigger and raise the gateprice (minimum import price), as happened most recently from July 1996 to July 1997, imports of most frozen product become prohibitively expensive. Industries that are dependent on frozen imports accumulated large stocks to guard against product shortages and higher prices resulting from the safeguard. Taiwan's FMD outbreak fundamentally changed the functioning of the safeguard mechanism in two ways. First, lack of product from Taiwan led to a draw down in stocks. Second, the continued absence of Taiwan reduces the likelihood of triggering the safeguard mechanism in the near term. Over the course of 1997, Japanese stocks are projected to decline from 255,000 tons to 163,000 tons. Stock levels should further stabilize in 1998 at 155,000 tons by year's end.
Image: The Japanese Safeguard Roller Coaster--Imports by Month
Pork imports for 1998 are expected to more closely coincide with pork consumption and utilization, as existed prior to introduction of the safeguard mechanism in 1995. Total imports are thus forecast to rebound to 833,000 tons, up 14 percent from 1997.
Taiwan
The outbreak of foot-and-mouth disease (FMD) in March 1997 dramatically reshaped the Taiwanese pork sector. By June, when nearly all herds had been vaccinated and the outbreak was basically under control, approximately 4 million pigs had been lost to the disease itself and the eradication effort. More than 6,000 of Taiwan's 25,000 hog farms were directly impacted.
According to the July 1997 survey, substantial breeding capacity remained in place, including more than 1 million sows. The 1997 pig crop is estimated at 14.4 million, based on a normal farrowing cycle in the first quarter of 1997 and moderate production in the last half of the year. Taiwan's hog inventory at the end of 1997 is forecast at 8 million head, a reduction of 25 percent from the January 1997 inventory.
Slaughter is forecast down 18 percent at 11.7 million head as those animals subject to the eradication scheme were destroyed and not allowed to go for consumption. The average slaughter weight is down 2 kg/head at 86.5 kgs. Low auction prices in the third quarter brought lighter weight animals to market and reduced the incentive to maintain a full feed ration. Pork production is forecast down 20 percent at 1.0 million tons.
Pork consumption dropped 80 percent in the weeks immediately following the outbreak, but has subsequently returned to near normal levels. A concerted government education campaign and hypermarket and supermarket discounts restored purchasing patterns to near normal levels. For the year, consumption is expected to decline 4 percent to 858,000 tons.
Taiwan's pork export industry has been devastated by FMD and is unlikely to resume exporting for 3 -5 years. Over the last two decades a distinct segment of the industry had evolved to exclusively supply Japanese style pork. These exports, which accounted for 30 percent of total production, were extremely lucrative, and drove much of the expansion in Taiwanese production. This market, however, cannot readily find an outlet on the local market, or substitute its Japanese business with exports to other destination not restricted by FMD. Producers and processors formerly tied into the export market are holding large stocks, upwards of 90,000 MT, and are in the process of developing domestic channels for their products as well as establishing productive capacity outside Taiwan. Efforts to sell frozen pork to Russia, North Korea or the Philippines and processed pork products to higher priced markets have yet to prove viable.
With few tools available to the government to draw pork off the market or otherwise stabilize prices, the industry is expected to go through periods of extreme volatility for the next 1-2 years as the domestic market finds a new balance. Farmer frustration is also evident. One example is in the negotiations for Taiwan's accession to the World Trade Organization (WTO). Liberalization of Taiwan's pork offal market is a high priority for U.S. negotiators, but Taiwanese producer groups are redoubling their pressure on the Taiwanese government to resist such moves.
Korea
Korean hog inventories stabilized in 1997 reaching 6.5 million head, an increase of 1 percent over 1996. Growth in hog inventories is forecast to be relatively small in 1998. Producers have apparently made some adjustments in their sow inventory and farrowing intentions for late 1997 and 1998, in preparation for increased competition from frozen pork imports, as that market was liberalized in July 1997. Further reductions in hog inventories are forecast in 1999 but will depend on pork demand in Japan as Korean exporters strive to fill the void left by Taiwan.
Pork production is expected to reach 872,000 tons in 1997, up 1 percent from the record-setting level of 1996. While most of this increase is a result of additional export opportunities in Japan, a 3 percent decline in pork production is anticipated in 1998, corresponding to a reduction in the Korean pig crop. Pork consumption continued to increase in 1997, reaching 913,000 tons, 5 percent above 1996, as concerns over E. coli and BSE turned consumers away from beef. With the July 1 opening of the frozen pork market, retail prices should remain stable and consumption should stay strong into 1998. A further increase in pork consumption is forecast for 1998, mainly attributed to an expansion in marketing efforts by local processors.
Despite record pork production in 1997, pork imports are expected to increase to 106,000 tons or 116 percent in 1997, mainly as a result of the frozen market liberalization. A doubling of pork imports to 213,000 tons is forecast for 1998. Most of this increase will come in the form of pork bellies, Boston butts, and forelegs for further processing. Traditionally, frozen pork bellies have dominated the import market and a continuation of this trend is expected in the near future. Much of this increase will likely come at the expense of the United States, as U.S. packers have not been able to compete with their Canadian and Danish competitors in manufacturing low cost single-rib bellies. In addition, little trade in fresh pork is expected as a result of liberalization.
The FMD outbreak in Taiwan has prompted increased pork exports to Japan. Total pork exports are expected to reach 70,000 tons in 1997, up 52 percent from 1996. Further increases are forecast in 1998, as total pork exports should reach 100,000 tons, up 43 percent over 1997. Virtually all of Korea's pork exports are to Japan.
China
Expansion in Chinese hog inventories continues in 1997, albeit at a slower rate than seen in previous years. Hog inventories reached 457 million head this year, up 3 percent from 1996. A 4 percent increase, to 475 million head, is forecast in 1998. Much of this increase is being realized through larger sow retentions and more pigs saved per litter. Furthermore, retail pork prices recovered in late 1996, prompting some of the increase in hog inventories. While previous expectations had indicated that high grain prices would have a dampening affect on inventories going into 1997, the opposite occurred as more grain is being fed than ever before.
Growth in Chinese pork production appears to be slowing with production forecast to reach 42.5 million tons in 1997, up 5 percent from 1996. Projections for 1998 indicate a 4 percent increase to 44.0 million tons. Some of the slowdown in pork production can also be attributed to a greater availability of alternative types of meat, particularly poultry. In addition, the Chinese government has undertaken a campaign to reduce the relative amount of pork produced and consumed. Pork's percentage of total meat consumption was traditionally well over 70 percent; however, in 1996, that percentage fell below 70 percent for the first time. This trend is expected to continue in the near future.
China's pork export market has been declining steadily since it peaked in 1995. Exports in 1997 are forecast to only reach 150,000 tons, down 22 percent from 1996 as its largest market, Russia, has virtually dried up. Much of the pork exported from China is of a poor, inferior quality. As a result, many of the pork processors in Eastern Russia have been forced out of business, as they are unable to obtain adequate supplies from their domestic markets. In addition, demand for pork has increased in China, growing faster than production. A further reduction in exports is forecast for 1998 to 90,000 tons, a decline of 40 percent over 1997. Of more importance, particularly to U.S. exporters, is the 1-year pilot program for importing pork for retail sale. The program, which began in June 1997, allows pork imports from select plants in the United States, Canada, and Australia. At this time, it is unclear how much pork will be imported into China; however, the opening of this opportunity could lead to further in-roads into the Chinese pork market.
European Union
After the BSE influence helped boost EU hog inventories 2 percent at the beginning of 1997, the hog cholera outbreak in the Netherlands has had a large negative impact on total EU hog inventories. EU beginning inventories in 1997 totaled 116.9 million head; by January 1, 1998, hog inventories are forecast at 112.5 million head, a reduction of 4 percent from 1997. Some improvement in the situation is expected over the course of 1998, as beginning hog inventories in 1999 could reach 114.9 million head, an increase of 2 percent. The shortage of hogs available for immediate slaughter has resulted in higher producer prices. Growth in hog inventories for 1998 are expected in Denmark, France, and Germany.
Image: Dutch Hog Cholera To Lower EU Hog Inventories in 1998
Pork production in 1997 is expected to reach 16 million tons, down 1 percent from 1996 as fewer hogs were available for slaughter. Germany was the hardest hit EU country due to hog cholera as virtually all of its live hog imports come from the Netherlands. Live hog imports account for 10 percent of total German slaughter. Several countries attempted to fill the void left by the Netherlands, mainly Denmark and France. A 1 percent increase, to 205.6 million and 11.8 million head, respectively, in both the EU pig crop and breeding herd is expected in 1997. Reductions in both are forecast in 1998 as increases in other countries will not be able to offset expected losses in the Netherlands.
Higher pork prices in 1997 will result in more pork available for third countries, particularly Japan, whose largest supplier, Taiwan, is out of the world pork market for the next 3-5 years. Pork exports are expected to reach 801,000 tons in 1997, an increase of 6 percent over 1996. Prospects for 1998 suggest that pork exports will fall a little short of the 1997 level. The sharp reduction in production in the Netherlands will mean that more of the production from other EU countries will be needed to meet EU demand.
Country Outlook
Dutch hog inventories at the beginning of 1997 were 14.3 million head, an increase of 2 percent over 1996. However, this record number of hogs was to be short lived as Dutch hog producers found themselves in the middle of an hog cholera epidemic by mid-March 1997. By mid-July, 5.5 million hogs or almost 40 percent of the Dutch hog population had been destroyed. A slowdown in outbreaks has occurred but the epidemic is not over. Beginning hog inventories in 1998 are forecast at 8.5 million head, a reduction of 5.8 million or 41 percent from 1997. As a result of the hog cholera outbreak and the difficulties associated with containing the spread of the disease, the Dutch government has proposed a plan to permanently reduce hog numbers in the Netherlands by 25 percent from the 1996 level. This translates into a total herd size of 10.5 million head. Such a plan would have a tremendous impact on other EU countries, particularly Germany, who imports a large portion of its slaughter weight animals from the Netherlands. Although the disease appears to be contained at the present time, no one is certain when the crisis will end.
Danish hog inventories reached a record 11.1 million head in 1997, an increase of 3 percent over 1996 as higher EU hog prices prompted farmers to expand. Much of this expansion is expected to fill the void left by Dutch hogs in Germany. Prospects for 1998 indicate another 3 percent increase in beginning hog inventories, setting a new record of 11.4 million head. Denmark is expected to become the number 1 exporter of live hogs within the EU in 1997, a position it should maintain until the Netherlands resolves its disease problem. Pressure from German slaughterhouses to obtain adequate supplies of hogs has forced some Danish processors to competitively bid for hogs. Denmark's third country pork exports are expected to reach 455,000 tons in 1997, an increase of 13 percent over 1996, as additional pork is destined for Japan and South Korea. A near record level of 480,000 tons is forecast for 1998, up 5 percent from 1997.
Hog inventories in France continued to increase during 1996, reaching 15.0 million head at the beginning of 1997, an increase of 3 percent from 1996. Another 3 percent increase is forecast for 1998. Pork production is expected to reach a record level in 1997, totaling 2.3 million tons, an increase of 4 percent over 1996. This is mainly due to a 4 percent increase in the French pig crop. A slight increase is forecast for 1998. Pork consumption in 1997 is expected to be 2.1 million tons, unchanged from 1996. A slight increase is forecast in 1998. In spite of higher pork production, pork prices in France have not declined as expected due to higher prices in surrounding EU countries, as well as third countries, prompting higher pork exports. With a higher level of production forecast for 1998 and stable exports, pork prices are expected to decline, prompting an increase in pork consumption. Third country exports are expected to be 145,000 tons in 1997, up 6 percent from last year. An additional 3 percent increase, to 150,000 tons, is forecast in 1998.
Beginning hog inventories in Germany reached 24.3 million in 1997, up 2 percent from 1996. Prospects for 1998 have improved as a result of the hog cholera outbreak in the Netherlands. This has prompted German hog producers to further expand their inventories to an expected 24.8 million head in 1998, an increase of 2 percent over 1997 and the highest level in 3 years. Expansion has been a direct result of higher producer prices. Live hog imports are expected to decline dramatically in 1997 to 1.5 million head, a reduction of 62 percent over last year. Import levels in 1998 are forecast to return near its pre-hog cholera level, reaching 3.0 million head. German pork production is expected to reach 3.5 million tons in 1997, down 3 percent from 1996 as a result of fewer hogs available for slaughter, mainly imported hogs. A 4 percent increase is forecast for 1998, as the availability of hogs increases, both from within Germany and from increased live hog imports. Pork consumption in Germany is expected to decline in 1997 as higher pork prices have pushed consumers towards lower cost meats, particularly poultry. Consumption is forecast to rebound in 1998, totaling 4.5 million tons, up 3 percent from 1997. Previously, pork consumption had been declining approximately 3 percent per year since 1992.
Russian Federation
Russian hog inventories declined further in 1997, reaching 19.5 million head, a reduction of 14 percent from 1996. A 13 percent reduction is forecast in 1998, as the rate of decline appears to be slowing. Much of the decline continues to come from former state-run enterprises. Expectations for 1999 indicate that inventories should be at around 16 million head, a reduction of 6 percent from 1998. Fewer pigs saved per litter are contributing to the decline.
Pork production is forecast to reach 1.5 million tons in 1997, down 12 percent from 1996, a slower rate of decline than has been seen in recent years. A further decline of 7 percent is projected in 1998, as production appears to be stabilizing along with hog inventories. Although weight gains have been declining over the last several years, carcass weights have been increasing in 1997, since dropping 35 percent in 1996. This coincides with the dramatic drop in Russian feed grain production in the early 1990's. Feed grain production has been on the rise in recent years providing adequate supplies of feed for livestock production, allowing for the moderation in the rate of decline in hog and pork production.
Russia continues to rely heavily on pork imports to meet domestic demand, and pork imports are forecast to reach 470,000 tons in 1997, an increase of 4 percent over 1996. Projections for 1998 indicate that pork imports will be unchanged from 1997. On average, imports have accounted for 20 percent of total consumption. That percentage is expected to increase to 24 percent and 25 percent in 1997 and 1998, respectively, as domestic production lags behind. The majority of Russian pork imports have come from China. Beginning this year, Russian authorities in the East have begun cracking down on Chinese imports for their inferior quality. This has caused many of the remaining pork processors in the East to close down due to short, high-cost supplies locally. However, a moderate amount of informal trade has been taking place, keeping some processors in business. Pork imports from the United States are expected to rebound in 1997 after relatively high prices in 1996 forced Russian processors to search for cheaper product elsewhere, primarily Poland and Denmark. The United States' share should be 47,000 tons, or 10 percent. High U.S. prices earlier in 1997 kept product from reaching Russia; however, prices have decline somewhat over the last several months, resulting in an increase in shipments of U.S. pork to Russia. This trend is expected to continue into 1998 as U.S. prices are forecast to decline further. Much of the product exported to Russia has been in the form of trimmings.
Poland
Although beginning hog inventories in 1997 only reached 17.7 million head, a reduction of 13 percent from 1996, improved profitability of hog production, adequate grain supplies, and a larger pig crop through additional pigs saved per litter are forecast to assist in rebuilding Polish hog inventories in the last half of 1997 and into 1998. A 5-percent increase is forecast for 1998, with inventories forecast to reach 18.5 million head. Further expansion in hog production throughout 1998 is prompting an 8-percent increase in beginning hog inventories in 1999 of 20.0 million head. Pork production is expected to decline in 1997 to 1.5 million tons, a reduction of 10 percent over 1996, as expansion in the herd results in lower availability of hogs for slaughter. A rebound in pork production to 21.8 million tons is forecast in 1998 due to herd rebuilding in 1997.
In previous years, pork has been the single most important source of meat protein in Poland, representing more than 60 percent of total meat consumption. However, pork consumption is expected to only reach 1.3 million tons in 1997, a decline of 10 percent from 1996 due to lower production and higher retail prices. A 3 percent growth rate has been forecast for 1998 due to expansion in the Polish herd. Retail pork prices rose 25 percent in 1996, making it more expensive relative to other meats. Pork prices continued to rise in early 1997 but are expected to slow down in late 1997 and into 1998 as larger supplies of pork become available.
Traditionally, Poland has been a net exporter of pork with approximately 75 percent of total exports going to Russia. This trend is expected to reverse with pork exports only expected to reach 160,000 tons in 1997, down 12 percent from 1996. A further decline of 13 percent is forecast in 1998. Much of the decline is due to reduced exports to Russia, which has seen increased imports from other countries, particularly the United States, during the first half of 1997.
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