Rabobank predicts slowdown in global pig production growth in 2022

According to Rabobank's latest quarterly report, pork production growth will decline in 2022 as the global market continues to be affected by the COVID-19 crisis and macroeconomic trends. Production costs have risen this year, and rising prices are not stimulating demand, especially in income-sensitive countries.

Pork consumption is expected to decline further in 2022, followed by an increase in production. At the same time, markets that have experienced a decline in pork prices will face oversupply as a result of this year's production and trade decline. Rapid price declines and associated producer losses in some markets will slow pig herd growth in 2022, helping to offset improved herd health and reduced exposure to African swine fever (ASF). Prices have stabilized since then but remain well below peak levels, the report said.

China is the world's largest pig producer and also the largest importer as the country has been fighting ASF for over 3 years. Chinese producers have responded to rising costs and the continued threat of ASF outbreaks by downsizing, driving down pig prices and forcing high-cost producers out of the market. Demand remains weak due to the pandemic. In response to this slowdown, China continues to restrict imports to balance supply. Given continued weakness in demand, Rabobank expects pork supplies to remain adequate after stock reductions, but if economic trends improve, supply may not be sufficient to meet market demand.

In the EU, the largest supplier of pork to the Chinese market, average prices have already fallen by 24% due to lower demand from China . Producers in Germany and the Netherlands are liquidating the herd and are expected to reduce production in the coming months. In the meantime, Spain and Denmark are expected to increase their pig herds, but at a slower pace than in the past couple of years.

U.S. hog inventories will remain tight until early 2022, but will be higher than the previous year. Even so, rising costs and additional regulatory restrictions are expected to dampen expansion plans, as are restrictions in the processing sector exacerbated by labor shortages. Domestic demand is expected to slow as higher costs are passed on to consumers and export growth acts as a favorable buffer.

Brazilian producers remain optimistic despite a 34% increase in feed costs compared to the same period last year. Sales to export markets remain strong, supported by the depreciation of the Brazilian real and larger shipments of pork. Analysts expect a 5.5% YoY increase in pork production, with additional growth expected in 2022.