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World Pork Trade Overview
World
Summary:
Despite increasing prices, world demand for pork continues to grow.
During the first half of 2004, average wholesale pork prices in the
United States, Europe and Japan rose by more than 15 percent.
Retail prices have remained relatively more stable, helping to sustain
world consumption at record levels. As
beef and poultry markets gradually recover from the disruptions of BSE and avian
influenza, growth in world pork consumption should continue, albeit at a slower
rate. Around the world, pork
remains the most widely consumed meat protein, even though poultry is catching
up. Rising incomes, particularly in
China, seem to be fueling growth in world demand. In the United States, the popularity of low carbohydrate /
high protein diets also appears to be energizing consumer interest in pork.
With growing worldwide demand, pork production is working to keep pace.
China, the EU, Canada, the United States and Brazil, which according to
FAO account for an estimated 80 percent of world production, will collectively
produce more than 80 million tons of pork in 2004. Production for the selected reporting countries is expected
to continue growing, increasing by about 1 percent in 2005.
The expansion of world consumption and production
underscores the increasing importance of trade, even where countries have the
capacity to be self-sufficient. Regional
differences in the consumer preference for particular meat cuts create
opportunities for trade. Meat cuts
can potentially be marketed wherever they receive the highest price.
Trade in meat cuts is in fact growing relatively faster than trade in
whole or half carcasses. Over the
last two years, exports of whole and half carcasses from major world suppliers
have grown 5 percent, while trade in pork meat cuts has grown by almost 8
percent. Still, as more high-value meat cuts are traded
internationally, the profit potential is often mitigated by a number of factors.
In many developed countries, there is an increasing cost with conforming
to more stringent environmental and animal welfare regulations.
As yet, there is no clear evidence to suggest that consumers are willing
to pay for this added cost. Trade
is also quite vulnerable to the many complexities that determine market access. Unlike domestic markets, international trading arrangements
can sometimes change dramatically overnight.
Notwithstanding these many uncertainties, major pork producers continue
to aggressively vie for very lucrative international market shares.
Pork exports by the major suppliers, which are projected to reach 4.2
million tons in 2004, are forecast to grow by 1 percent in 2005.
Key
Exporters
·
United States: Strong domestic
and international demand is expected to continue sustaining hog prices in 2004
and 2005. Pork production in 2005 will reach 9.5 million
tons, an increase of 2 percent from 2004. Live hog imports from Canada, which have helped maintain U.S. pork production at
record levels, are currently subject of anti-dumping and countervailing duty
investigations. The current
forecast however, does not take into account the implications of the recent
preliminary determination on the anti-dumping case.
The U.S. Department of Commerce is expected to make a final determination
on both investigations by March 7, 2005. In
any case, U.S. pork production, consumption, and exports continue to
grow. The top three markets, Japan,
Mexico, and Canada, still account for about 80 percent of U.S. exports.
Demand for U.S. pork is expected to remain strong in 2005, especially as
the relative weakness of the U.S. dollar continues to further enhance the
competitiveness of U.S. pork.
·
Canada:
Canadian pork production is forecast to grow by less than 2 percent in
2005, to 1.9 million tons. Strong prices for market hogs and record exports of live hogs
to the United States are expected to encourage an expansion of the breeding
herd. Canadian exports of feeder
and slaughter pigs to the United States have been very strong, reaching over 7.4
million head in 2003, an increase of 30 percent from 2002.
Live hog exports are currently forecast to reach new records in 2004 and
2005. On October 15, 2004, the U.S.
Department of Commerce announced a preliminary anti-dumping determination on
U.S. imports of live swine from Canada, setting preliminary dumping margins
ranging from de minimis to 15.01 percent. Although the investigation is continuing, a duty on hogs
could encourage an expansion of Canadian slaughter capacity, the current dumping
margins may end up favoring lower value exports (i.e. feeder pigs).
Feeder pigs already account for about 67 percent of total live hog
exports to the United States. Canadian
hog producers are likely to shoulder most of the added cost of shipping hogs to
the United States.
Canadian domestic pork consumption is gradually recovering from the
disruptions caused by the Canadian BSE crisis of May 2003.
At the time, consumption fell by almost 10 percent, as Canadian consumers
increased purchases of domestically produced beef in response to lower beef
prices. Pork consumption is expected to increase 5 percent in 2004,
and by more than 1 percent in 2005. Bilateral
pork trade between Canada and the United States continues to grow significantly.
The United States is Canada’s largest export market, accounting for
over 56 percent of total pork exports in 2003.
Although pork exports to the United States have decreased by almost 9
percent during the first seven months of 2004, recent exports to Japan and
Mexico have been particularly strong. Pork
exports are expected to increase by 2 percent in 2005.
·
Brazil:
Brazilian pork production is forecast to increase by about 2 percent in 2005.
Lower feed costs should benefit hog producers.
Hog production, particularly in the center-west region around the State
of Mato Grosso, is growing significantly because of state, federal, and foreign
investment. Increased hog
production in Mato Grosso appears to be offsetting small declines in production
in the traditional producing areas of the South.
Domestic consumption is expected to increase 2 percent in 2005, driven by
improving economic conditions and higher incomes.
The pork industry recently launched a promotional campaign designed to
encourage greater domestic consumption of fresh pork. Almost 70 percent of Brazilian pork consumption is still in
processed form. Currently, Brazil
exports almost one-quarter of its domestic production.
While heavy reliance on the Russian market continues to periodically
generate considerable uncertainty, Brazilian pork exporters are working toward
greater market diversification. During
the first half of 2004, exports to markets such as South Africa, Singapore,
Ukraine, Bulgaria, Armenia, and Lithuania, have increased.
For more information on Brazil, please refer to the following report: http://www.fas.usda.gov/dlp/IATRs/2004/Brazilmeat.html
·
European Union: Lower beginning
inventories and reduced sow numbers continue to affect the 2004 outlook on
production in both the EU-15 and in the new EU member states. Pig production in the EU-15 is expected to decline slightly
from 2003, as improving productivity appears to be offsetting rising production
costs (For additional information see tables on pages 32 and 33).
Producer prices have generally been rising due to tighter supplies, and
there is some evidence of strengthening demand, particularly in Germany.
French producers, still recovering from the effects of the 2003 drought,
will receive an $18 million aid package for market restructuring, research, and
to promote quality and branded products. In
January 2004, concerns over rising feed prices, as well as the relative strength
of the Euro vis-à-vis the U.S. dollar, brought the EU Commission to announce
that it would reintroduce export refunds for pig carcasses and cuts.
The decision, which was later rescinded in March, would not in any case
have applied to the 10 accession countries, which entered the EU on May 1, 2004.
With the accession, the EU Commission estimates that over the next six
years, EU-25 pork production could increase by as much as 30 percent from the
2003 EU-15 production level. However,
in 2004, pork production in the new member states is expected to decline nearly
5 percent, mainly as result of reduced slaughter in Poland, Hungary and the
Czech Republic. While Poland’s
pig inventories are expected to gradually recover, 2005 pork production in the
new EU member states should remain at the 2004 level. Nevertheless, pork consumption in many of the accession
countries should remain strong, particularly as incomes increase.
EU-25 external trade is forecast to decrease in 2004 and 2005, mainly as
a result of the Russian tariff rate quota.
Although the relative importance of intra-trade with the new member
states is certain to increase, extra EU-25 exports, particularly those
originating from countries like Denmark and the Netherlands will still continue
to grow.
·
China: Avian
influenza has had a significant impact on Chinese pork production and
consumption. Lingering concerns
over the bird flu epidemic appears to be encouraging pork production in response
to rising consumer demand. In
2005, Chinese pork production is expected to reach 47.5 million tons, a slight
increase from 2004. Production
costs are quickly rising. Despite
prices currently reaching historically high levels, rising per capita income
should help fuel Chinese consumption in 2005.
Pork exports are also expected to grow significantly in 2005.
While the Russian quota could limit the export potential from northern
provinces like Heilongjiang, China is expected to remain very competitive in
Asian markets like Hong Kong, Japan and North Korea.
Key
Importers
·
United States: In 2003, the United States
imported a record 538,000 tons of pork, an 11 percent increase from 2002.
However, pork imports for 2004 and 2005 are expected to decrease,
primarily due to the relative weakness of the U.S. dollar.
·
Japan:
Japan remains the world’s largest pork importer.
After imports declined by almost 3 percent in 2003, Japanese imports are
expected to increase 8 percent in 2004 and 2 percent in 2005.
Rising inventories of frozen pork, particularly used for further
processing, can periodically weaken import demand.
At the same time, importing pork to build inventory often ends up
triggering the pork safeguard. In
2003, Japanese domestic production reversed earlier trends by growing 2 percent
over the previous year. Domestic
production is expected to increase by about 1 percent in 2004, and should remain
stable in 2005. Strong consumer
demand and limited availability of beef and poultry are expected to push 2004
pork imports to 1.2 million tons, a new record.
The safeguard duty
on
pork imports, which raises the
gate price for carcass imports from 409 Yen to 510 Yen per kg ($1.54 per lb to
$1.92 per lb), and the gate price for pork cuts from 546 to 681 Yen per kg
($2.05 per lb to $2.56 per lb), will expire on March
31, 2005. This special safeguard
provision is designed to trigger when quarterly imports exceed the average of
the three previous corresponding quarters by 19 percent or more.
It is unlikely that a surge in imports will again trigger the safeguard
in 2005. For more information
on the Japanese pork safeguard, please refer to the following report: http://www.fas.usda.gov/dlp/IATRs/2004/JapanPorkSafeguard.html
·
Hong Kong: With disruptions
in beef and poultry supplies, Hong Kong’s pork trade remains strong.
More restaurants seem to be promoting pork and lamb.
Macroeconomic conditions are generally improving, and the tourist trade,
particularly from mainland China, appears to be picking up.
Imports are forecast to grow by about 5 percent in 2004 and nearly 6
percent in 2005. Hong Kong
meat traders have noted that China is becoming more aggressive in trying to
tackle the smuggling problem. Also,
there seems to be a scarcity of import permits, given the growth in consumer
demand.
·
Mexico:
Mexican pork production is expected to reach almost 1.2 million tons in
2005, an increase of about 2 percent from the projected 2004 level.
Live hog imports, which fell by more than 50 percent in 2003, are
forecast to increase in 2004 and 2005. The
Mexican pig crop and slaughter are also expected to rise to meet growing
consumer demand. Even as Mexican
beef imports from the United States gradually resume, pork consumption is
expected to remain strong, with annual growth of about 6 percent in 2004, and 3
percent in 2005. With strengthening
prices, the profitability and productivity of the Mexican pork sector continues
to improve. Nevertheless, growth in
domestic consumption continues to outpace domestic supply.
Mexico’s imports are therefore expected to grow by more than 6 percent
in 2005. The United States, which
accounts for about 80 percent of Mexican imports, is expected to continue to be
the major pork supplier. At
this time, the Government of Mexico is still pursuing a self-initiated
anti-dumping investigation on imports of U.S. ham.
·
Russia:
In 2005, domestic pork production is expected to grow by almost 3
percent, as feed supplies and prices remain favorable.
The tariff rate quota (TRQ) system, designed to facilitate the recovery
of Russian meat production, sets country specific quotas on imports under HS
code 0203 (fresh and frozen pork). The
2004 TRQ parameters, announced on November 29, 2003, set the following
country limits: the
European Union (including the 10 accession countries) – 227,300 tons; the
United States – 42,200 tons; Paraguay – 1,000 tons; all other countries
(except CIS countries) compete for the remaining 179,500 tons.
The tariff is set at 15 percent, but no less than € 0.25 /kg (14 ¢
/ lb) for volumes within the TRQ. Above
that level, the tariff becomes 80 percent, but no less than € 1.06 /kg (60 ¢/
lb). The TRQ has contributed to a
general increase in meat prices. Furthermore,
administrative difficulties in the distribution of TRQ licenses suggest that the
2004 annual quotas are unlikely to be completely filled.
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