Weaker economic growth is beginning to take a toll on global pork consumption. Despite early signs that the worst of the inflationary impact may have already passed, the lagged impact on consumption is likely to be felt throughout 2023.
In a slowing economy pork remains well-positioned, as demand for the protein is historically less income-sensitive than more expensive proteins like beef and premium seafood. Nevertheless, we see persistently high retail prices limiting consumption of all proteins. Consumers continue to conserve capital by shifting everyday purchases to lower-value protein options, switching channels, and moving to smaller pack sizes.
Moreover, industry optimism in 2022 following a notable upward shift in pork consumption (and prices) in some markets and expectations of a 2023 recovery of pandemic-restricted consumption in others contributed to planned supply growth in 2023. That growth will take time to curb. Slowing supply in Europe will help balance the industry, yet high costs of production and limited consumer support will require a more conservative approach to production to preserve capital.
Although a modest improvement in production costs is expected in 2023, local conditions will vary and risk management will remain critical to success. Global feed stocks are at historically low levels, and availability remains tight. A disappointing Argentine harvest will partially offset Brazil’s record 2023 soybean crop, and the small global cushion in grain and oilseed stocks is expected to drive additional feed cost volatility in 2023.
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These are the main highlights:
North America: Pork exports from the US and Canada remain competitive in key markets, but hog production growth will slow as consumption softens. Losses are mounting.
Europe: Europe’s supply of pigs is expected to remain tight in Q2. Meanwhile, producer margins are recovering on historically high pig prices.
China: Prices have been weakened by soft demand and additional losses following African swine fever. Production is expected to tighten in late Q2 and Q3, leading to higher prices as demand begins to recover.
Brazil: Exports continue at a strong pace, and expectations of a drop in feed prices improve the margin outlook for producers.
Southeast Asia: African swine fever remains a challenge for the region. Consequently, slow growth is expected in 2023.
Japan: Pork demand will be weaker in Q2, with pork imports from Europe expected to decline, due to high prices and high inventories.
