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According to the latest Rabobank quarterly pork report by Christine McCracken, with inflation outpacing wage growth, lower real wages are expected to negatively impact protein consumption in the last quarter of 2022 and in the first half of 2023.
After disappointing harvests in the US, parts of Europe, and Asia, grain and oilseed inventories are near record lows and prices at historical highs. The acreage of corn and soybeans being planted in the Southern Hemisphere could help ease, but not eliminate, the strain in 2023.
Rabobank expects global pork production to fall 2% in 2022 and to see almost no material growth in 2023, with production in key growing regions significantly lower. Historically high global production costs are limiting herd expansion in most regions. With few prospects for cost relief and limited visibility around the strength of consumer demand given the challenging economic environment in 2023, producers have scaled back plans to add to their herds.
Other highlights from the report include:
North America: Production fell in response to high costs, health challenges, and regulation. Exports have slowed on currency strength and high relative pork costs. Domestic demand remains stable as the economy slows.
Europe: Rabobank expects production to decline 4-5% year-on-year in 2022 due to ongoing margin pressure. Consumer demand will be tested as consumers face higher energy bills in the winter.
China: Hog supplies remain tight, supporting continued strength in prices. Pork demand may improve despite vulnerability to Covid policies. Rabobank estimates the total herd inventory has fallen by over 6% year-on-year.
Brazil: Production margins improve but still face challenges. Exports remain under pressure, with volumes down 5% year-to-date.
Southeast Asia: African swine fever continues to impact production, but recovery is underway. Strong input costs pressure margins.
Japan: Frozen imports remain high. Classical swine fever affects domestic production.
October 31, 2022/ Rabobank.
https://research.rabobank.com
