According to the latest reports from Rabobank and Global AgriTrends’ for the third quarter of 2023, sluggish economic growth, weak consumption, recurrent disease outbreaks, and productivity issues are shaping an unfavorable outlook for the global pork sector.
Although 2023 started strong, Rabobank’s forecast suggest a weakening of international trade. Sluggish economic growth continues to influence consumer purchase decisions worldwide. This has resulted in slower exports, increased unemployment, and waning investor confidence, which are concerning issues for China, some of Southeast Asia, and South American countries.
According to Global AgriTrends’ outlook, the post-COVID injection of about 18 trillion USD into the global economy has led to sustained inflation. As a result, many companies and industries have adjusted their business models and turned to supply management. Production reductions have resulted in shortages that have driven up prices, impacting sectors as diverse as the aviation, automotive, and meat industries. In this scenario, consumers are the most impacted, facing higher prices and potential exclusion from accessing certain goods and services.
Consumer trends
In North America and Europe, consumers face the challenges caused by wage growth, which although modest, has been sustained and, more importantly, has outpaced inflation rates throughout the year. A wage increase above inflation means there is more money circulating. But, without effective mechanisms to manage the situation, there is an upward pressure on the prices of goods and services, and although consumers have more money, it is worth less in terms of their purchasing power, especially regarding food.
These circumstances are changing consumer behavior: they are trading down, buying smaller portions, and switching channels. Still, pork –which has a relatively stable price compared to premium beef and seafood– maintains a solid position in the daily diets of consumers in both continents.
Regarding pig feed, the situation has generally stabilized, though certain elements of risk persist. Corn and soybean prices have been volatile entering July due to the smaller-than-expected soy planted areas and larger-than-expected corn areas in the United States.
According to Global AgriTrends, post-COVID financial stimulus varied across countries, with Germany, Japan, and the US leading on a per capita basis. The resulting “sticky inflation”, a term used when inflation persists and is difficult to reverse, has raised the cost of living. In the US, droughts and other factors have reduced cattle herds, anticipating tighter supply and higher prices in the future. Furthermore, the Australian Bureau of Meteorology has announced the arrival of the El Niño phenomenon, which might lead to drier conditions and impact the country’s agricultural production.
The challenge of diseases
Animal health is still threatened by disease outbreaks. African swine fever (ASF) continues to significantly impact production in Asia and Europe. While ASF outbreaks slowed in the second quarter, they remain persistent in some regions, disrupting local supply chains.
In addition, porcine reproductive and respiratory syndrome (PRRS) remains a challenge in Spain, causing a substantial drop in pork production.
“The pork industry is facing challenging times. According to the latest Rabobank report, the economic slowdown, a drop in consumption, and persistent disease outbreaks are presenting a difficult outlook for the remainder of 2023. Despite the various challenges, ChileCarne trusts in the adaptability and resilience of our sector, staying alert and ready for this ever-changing environment,” said the president of ChileCarne, Juan Carlos Domínguez.
Learn more about Rabobank’s report at:
https://research.rabobank.com/far/en/sectors/animal-protein/pork-quarterly-q3-2023.html
