Porto Alegre, August 23, 2023 – The European pig chain continues to face major challenges, starting with the shrinkage of production. Last month, the US Department of Agriculture (USDA) estimated the European Union production at 21.65 mln tons, which is the lowest in the last 22 years. Some factors strongly impacted the bloc, which ended up resulting in this number, namely: the spread of African swine fever in Eastern European countries and Germany, which resulted in a decline in Chinese purchases from the second half of 2021. Moreover, there was a failure in the corn crop due to severe drought in the past, which increased the cost of production. The Ukraine x Russia war also impacted the cost, considering that energy reached very high levels. With a decline in Chinese purchases, greater availability of pork in the bloc, high costs and losses, the sector sought production adjustments in a very aggressive way.
USDA estimated the region’s herd of matrices at the beginning of 2023 at 10.397 mln head, the lowest level in the available series (1999-2023). The herd number for the end of this year was projected at 131.6 mln head, also the lowest level in recent decades. With these numbers, it is natural to expect weak production and high prices for the entire chain in 2024, which tends to negatively impact export numbers.
On the other hand, it tends to encourage the search for replacement and births, if the sector envisions profits ahead. It is worth pointing out that the cost of nutrition tends to cool down, with commodities globally under pressure, with the prospect of good new corn and soybean crops in Brazil, Argentina, and the USA. One should also consider the large Russian wheat crop, despite the ongoing war. In any case, the search for herd growth is not a process that occurs overnight, thus, the scenario will remain difficult in terms of production in the coming few years.
Exports from the European Union reached 1.812 mln tons between January and May 2023, according to Eurostat data, down 15.3% from the 2.139 mln tons registered in the same period last year. Spain, the main exporter of the bloc, shipped 584.064 thousand tons this year, down 15.4% from 690.446 thousand tons exported from January through May 2022.
As for the evolution of pork prices, it reached record levels this year in the bloc, which could not be different due to the decline in production. The pork carcass average in the bloc reached € 250.51/100 kg at the end of July 2023, up 22.28% since the close of 2022, when it was positioned at € 204.86/100 kg. When considering the end of 2021 (the bottom of the graph is attached), when the average price was € 133.09/100 kg, the increase reached 88.23%.
Europe is expected to remain a major exporter in 2024 but is likely to lose a large share of the market due to the decline in attractiveness. Brazil and the USA will have a possibly cheaper product for exports. Brazil will try to deepen partnerships with Asian countries, such as the Philippines and Vietnam, countries that still feel the impact of African swine fever.
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