Producers’ returns will be challenged by rising costs – including feed, energy, freight, herd health, and labor expenses. Production growth is expected to slow, as is global trade. Uncertainty remains regarding how consumers will respond once higher costs are passed on to them.
Higher feed and energy costs are expected to pressure margins. A disappointing South American crop and Black Sea grain export uncertainty are exacerbating an already tight global feed supply, increasing feed costs 20% YOY. Producers will focus on efficiencies and limit herd growth, with expected declines in financially stressed regions including the UK, Germany, and Southeast Asia.
Consumer demand remains mixed. Pork sales remain brisk in the US and South Korea, which have emerged from pandemic restrictions, while sales have lagged in countries like China, Japan, and Mexico, which are still struggling with Covid-19-related dining restrictions and weaker economic growth. We expect higher-cost pork to limit 2H 2022 demand, despite improved in-home consumption and high-cost protein alternatives.
The global pork trade in 2022 is expected to decline, driven by weaker economic trends and ample pork supply. Slower 1H 2022 exports will likely continue, as buyers remain cautious due to global economic uncertainty and higher-cost pork, unless import markets find themselves short.
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These are the main highlights:
China: Demand remains weak on a new round of Omicron infections and lockdowns. Pork imports declined materially entering 2022.
Europe: Pig and piglet prices jump as supply contracts. Margin pressure through the chain remains as input costs rise.
North America: Record hog prices due to lower production are helping offset rising costs. Demand is stable but could weaken on higher prices and USD strength.
Brazil: Production is already affected by squeezed margins. Exports remain positive despite a drop in Chinese demand.
Southeast Asia: Both Covid and ASF are affecting Southeast Asian pork markets. Import policy changes are in favor of more imports.
Japan: Increase of pork imports will continue. Pork production remains flat.