World Hog news:

[Mustang Sally Farm]

Wednesday, May 11, 2011
First Shipment of Chilean Pork to China
CHILE - The first shipment of pork has been made from Chile to China, expanding Chile's existing Asian markets of South Korea and Japan.


The trade deal with China is the culmination of a long process of trade liberalisation that has been developed since 2004 by the Association of Pork Producers in Chile, ASPROCER, together with the Agricultural and Livestock Service, SAG, and the Ministry of Agriculture.

Minister of Agriculture, José Antonio Galilea, announced that six processing plants have been authorised to export pork to China, during his official visit to China and after meeting with the Director of Administration for Quality Supervision and Quarantine of the People's Republic of China (AQSIQ), Zhi Shuping, with whom he discussed the issues relating to the authorisation for the export of new agricultural products from Chile.

Minister Galilee said this first shipment was a milestone in the joint work developed by public and private sectors, opening new markets for domestic food.

"The completion of this post confirms that Chile has high safety and quality standards recognised worldwide, protected by the high standards in the industry, allowing us to meet all the demands of new markets," said Minister Galilee.

The first shipment is expected to arrive in China on 6 June.

Juan Ignacio Rios, general manager of the exporter Friosa, said: "The news of the opening up of the Chinese market has been awaited by all pig meat exporters. For Friosa to be the first to make a shipment to China is an honour, and was the result of hard work to keep our facilities to a high standard, in order to be prepared for all demanding markets."

The six plants in Chile are: Lo Miranda Ltda., Rosario Ltda., Las Pataguas Comercial MaxAgro Ltda , Coexsa S.A., Frigorifico O´Higgins SA and Friofort.

[Mustang Sally Farm]

Brazilian Markets - May 2011
BRAZIL - The Brazilian roller coaster rolls on, continuing its wild and unpredictable ride! The last Brazilian market report, at the end of March, was optimistic, with prices rising strongly, writes Martin Riordan, Sales and Service, Genesus Brazil.
 

But then the tide turned, and since the beginning of April, prices have been falling sharply across the country.

This can be seen partially in the chart, which is based on data from CEPEA, a market research body linked to the University of São Paulo.


The chart shows pig prices in the five major producing states in Brazil. It clearly shows how the two states of Minas Gerais (MG) and São Paulo (SP) constantly outperform the three southern states in terms of price. This is because, in those two states, there is still an active market for hogs, with many producers and many buyers.

However, the industry in the south is dominated by the big integrations, now ruled by Brazil Foods, which incorporates what were previously three big companies, Sadia, Perdigão and Avipal. As Brazil Foods, they have upwards of 400,000 sows.

In this situation, the market for independent hogs is limited. The big companies are self-sufficient in production, and recently the few remaining independent producers in our state, Rio Grande do Sul (RS), complain of a total lack of buyers. Even at low prices, they cannot move their hogs. After a transition period of some ten years, this would appear to be the final death-knell for independent production in this state.

The chart also shows that, after a period of high prices in November 2010, there was a constant collapse until March, when prices started picking up. But this was short-lived, with prices quickly stabilizing in April, and since mid-April the collapse began again (not shown on the chart).

Once again, the question: what explains this? Well, Brazilian exports have been mediocre this year and what had been sustaining prices (or stopping them falling further) was the domestic market. But over recent weeks, this too has held back, probably due to falling beef prices. Brazilians in general prefer to eat beef, and only move to pork to keep the total meat bill within their budget. With high beef prices earlier in the year, the pork market rebounded. Now that beef has fallen, the pork market has slumped.

Prices in the south of Brazil are now around US$ 1.34 per kg live weight, while production costs are about US$ 1.60. So a market hog brings a loss of nearly US$30. And the immediate price tendency seems to be downwards. Some producers in RS reported during the week of May 16 that they couldn’t find buyers at US$ 1.18. Well, not selling, technically they don’t make a loss, but, as we know, their dilemma is much worse. No money coming in to buy feed for more hogs than they should have. Those who have been there know how heart wrenching this is.

The chart shows export performance over the last 12 months, in terms of volume and income. It can be seen from the volume bars that a decline began in October last year which only reversed in February this year, and slowly. There seems to be a trend of rising volume - it remains to be seen if this will continue. The blue income line shows a rising income in US$, indicating higher prices. But over this period the Brazilian currency has appreciated against the dollar, which means that in local currency the increase has been much less. And not enough to prevent the severe fall in hog prices.

On 11 April, the President of Brazil, Dilma Rousseff, arrived in China on an official visit, and within a few hours it was announced that China would begin to import pork from Brazil. This is an important break-through, but as yet has made no noticeable impact on domestic prices. As usual, there will be a period of discovery, trying to work out what real effect it will have. So far, only three plants have been approved by the Chinese, and the talk is of 200,000 tonnes over 5 years. It will obviously help the market in the medium term, but is not a magic wand to solve present problems. First shipments are expected to go in the final quarter of 2011.

Feed prices have fallen slightly, but not significantly, once again not bringing hope to the beleaguered producers. Different regions of Brazil show different results. In the Center West, corn has been harvested recently, and export prices have fallen, allowing prices to drop slightly. But in the south, prices have held steady, bringing no relief.

 

[Mustang Sally Farm]

Friday, June 17, 2011
Australian Pork Favoured in Singapore
AUSTRALIA - Pork from Australia is the top choice in Singapore.

Beef, lamb and chicken might be the most popular meats on the menu in Australia, but Stock Journal reports that for the country's near neighbours in Asia, it is pork and chicken – and in Singapore, the pork is Aussie pork.

Australia's gold-plated reputation as a clean food production source, our strict quarantine standards and our relatively close proximity to Singapore have provided local pig producers with valuable credibility and an important market outlet across the Java Sea.

Fresh, chilled Australian product represents about two-thirds of all supermarket pork sales in Singapore.

The figures were as high as 98 per cent five years ago but according to Australian Pork Limited's marketing general manager, Peter Haydon, current volumes – about 15,400 tonnes a year, worth A$63.5 million – are a more sustainable amount for Australia to supply profitably.

Australian sales into Asian had generally been growing quickly in recent years but from a smaller base than Singapore.

Hong Kong (worth $6 million a year) and Japan ($2 million) were significant while Korea and the Philippines were smaller export opportunities making notable growth spurts.

Mr Haydon said increasing volumes of competitively-priced frozen pork (from Brazil and North America) were creating more competition in Singapore, but the market had a clear preference for Australian product, even though it was more expensive.

He explained: "Singapore is very diligent about food health issues, and Australia is considered a supplier that fits well with their standards.

"They don't produce any food themselves so they tend to be particularly careful about maintaining tough standards on whatever comes in from outside."

Mr Haydon said apart from valuing Australia's biosecurity restrictions and clean, green production image, Australian pork also tasted best according to Singaporean consumer feedback.

He added: "Taste is a core reason for its popularity, although I can't explain exactly what it is about the taste that people prefer."

According to Stock Journal, alternative product choices, such as frozen meat or fresh pork from Indonesia do not rate as well as Australia exports, about 40 per cent of which are sourced from Western Australia, 25 per cent from Queensland and 20 per cent from New South Wales.

[Mustang Sally Farm]

Friday, June 24, 2011
Ukraine's Meat Production Forecast to Grow in 2011
UKRAINE - A reduction in the profitability of the production of all types of meat, which is expected this year due to a significant rise in the price of feed, will trigger a slowdown in the pace of production growth and a further redistribution of the market.


According to an annual survey conducted by the Ukrainian Agribusiness Club, entitled Doing Agribusiness in Ukraine 2011, the growth in meat production in 2011 will amount to 3-4 per cent, whereas a year earlier this figure was 7 per cent.

"According to our calculations, meat production in 2011 will amount to 1.93 million tons in carcass weight, and the share of poultry meat will rise to 56 per cent, while the share of beef will fall to 12 per cent of the total meat production. In the overall structure of the market, only the share of pork will remain unchanged - 32 per cent," Director of the AgriSurvey Agency, an analytical unit of the Ukrainian Agribusiness Club, Taras Hahahiuk, said.

[Mustang Sally Farm]

Friday, June 24, 2011
Brazil's Pork Exports Rose Again in Value
BRAZIL - Pork export volume in April was marginally more than in the same month of the previous year but the value of those exports was 10 per cent higher in US dollar terms.


According to ABIPECS, Brazil exported 44,988 tons of pork in May 2011, which is 2.3 per cent less than the same month last year. The average price per ton in US dollars – $2,815 – was 9.8 per cent higher than one year ago. The value of March's sales was just over US$126.6 million, which is 7.3 per cent more than in May 2010.

For the year to date, the volume exported was 214,100 tons, 3.9 per cent below the equivalent figure for 2010. The value of those export is up 7.2 per cent at just over $583.1 million. The average price is $2,724 per ton, which is 11.5 per cent above that of one year ago.

[Mustang Sally Farm]

Pigs Increase in Fiji's North Division
FIJI - The existence of more than 13,000 pigs in the Northern Division has not attracted a popular market.


Senior Northern Agriculture officer Maikali Drauna said the demand for beef, goat and sheep was more popular than pork.

"We have a total of 13141 pigs in Vanua Levu but there is no market here and even the butchers don't sell pork except beef and goat," he said.

"There are various reasons like there are some butchers in Vanua Levu that are owned by Muslims and their religious beliefs prevent them from selling pork."

This, however, has not disheartened farmers, reports The Fiji Times Online.

Mr Drauna said they were encouraging farmers to continue to expand their piggeries to meet any future demand.

"There may be no market now but once we start commercial-based piggeries, there will be a demand because proper processing will be involved before pork is sold.

"The provinces of Cakaudrove, Bua and Macuata will each have a piggery and will be commercially-based ones.

"So if farmers continue to have their piggeries now and expand them, the supply to meet and increase in demand will be consistent."

[Mustang Sally Farm]

Monday, July 18, 2011
June Pork Exports Jump in Volume and Value
BRAZIL - Pork export volume in June was more than 12 per cent higher than in the same month of the previous year and the value of those exports was almost 30 per cent higher in US dollar terms.


According to ABIPECS, Brazil exported 52,752 tons of pork in June 2011, which is 12.4 per cent more than the same month last year. The average price per ton in US dollars – $2,884 – was 15.4 per cent higher than one year ago. The value of June's sales was just over US$152.1 million, which is 29.7 per cent more than in June 2010.

For the year to date, the volume exported was 266,852 tons, 1.1 per cent below the equivalent figure for 2010. The value of those export is up 11.2 per cent at just under $735.3 million. The average price is $2,755 per ton, which is 12.4 per cent above that of one year ago.

[Mustang Sally Farm]

Friday, July 29, 2011
Consumers Seek Alternatives as Pork Prices Soar
SOUTH KOREA - The recent outbreak of foot-and-mouth disease has been driving up prices of pork, and local consumers are now opting for other kinds of meat.


According to The Chosun Ilbo, the Korea Rural Economic Institute announced in its survey of 750 consumers this month that over 80 per cent had started buying other kinds of meat because domestic pork has become too expensive.

Chicken topped the list of replacements with 36 per cent of respondents switching to this popular poultry, followed by domestic beef, duck and imported beef and pork.

The going price of 100 g of pork now stands at around W2,400, up more than 30 per cent from last year (US$1=W1,052).

[Mustang Sally Farm]

Friday, August 05, 2011
Brazilian Hog Market – July 2011
BRAZIL - Try as one may, it is difficult to get away from the roller coaster concept of the Brazilian pig market, writes Martin Riordan, Sales and Service at Genesus Brazil.
 

Each time a new Brazilian Market Report has been prepared this year, prices have taken another wild swing. But at least this time, it is in the right direction!

A rapid rise in pig prices since the beginning of July, which has been seen to a greater or lesser extent across the country, indicates that a sudden shortage has developed. In part this shortage is due to producers cutting back on sow numbers over recent months as a reaction to heavy losses.

In São Paulo state, which is a thermometer of national supply and demand due to the large number of producers and smaller industries creating a competitive environment, prices have risen from about 2.10 real (BRR; US$1.34) per kg live weight near the end of June to the present price of BRR3.09 (US$1.97), a massive increase of 47 per cent. With such a big jump, São Paulo attracts pigs from other states, causing local shortages which force prices to rise.

A report from Mato Grosso state for 22 July mentions a price increase from a low of US$1.09 per kg live weight in May to this week's price of US$1.50, some 38 per cent more. Production costs are estimated at US$1.34, so producers are back in profit.

What has brought about this sudden turnaround in the market? As usual, nobody seems to be too sure and there are few reliable statistics on which to base an argument. However, some factors have certainly played a part:

Many producers have reacted to the general crisis in the industry, which began with the financial crisis in October of 2008, by cutting back or stopping production. Thus the number of independent market pigs has certainly declined. In our region, which had hundreds of producers a couple of decades ago, it has now become difficult to buy a pig to roast for a barbecue as there are so few producers.


The price of beef has risen firmly, getting back towards the high end-of-year prices. As beef is the meat of preference for the Brazilian barbecue, pork consumption rises to keep the cost within budget. So this will have the effect of increasing domestic demand.


A famous national dish called feijoada uses several ingredients from the pig, including ribs, tails, ears, trotters, bacon and pieces of pork, all stewed slowly with black beans. And feijoada is a very popular dish when temperatures fall, particularly in the populous states of São Paulo and Rio de Janeiro. The month of June had several cold spells, with heavy frost in the South and temperatures below 10°C in the Southeast. Feijoada is not solely responsible for increased domestic demand: in general, pork consumption traditionally rises in Brazil as temperatures fall.


The volume of pork exports in June bucked the monthly trend this year and, at 52,752 tonnes, was 12.35 per cent higher than that of June 2010. The increase in total value was 29.65 per cent. The accumulated export volume from January to May was down four per cent year-on-year. This reversal was greeted with surprise, as during June Russia announced that it was banning exports from more than 80 meat plants in Brazil, including many of the main pork-exporting plants. The reason given was the usual one, that the plants were not observing Russian health standards. However, it is generally taken that the reasons for the ban were more commercial than technical.
Also, the price of corn has dropped back slightly, around 10 per cent on a national average, reducing production costs. So, with higher prices for market hogs and lower production costs, for the first time in several months, many producers are now breaking even or making a small profit, a situation which has brought relief to those who have survived the recent crisis. The price of corn has normal regional variations in Brazil, due to differences in production and consumption. Current prices range from about US$7.55 per bushel in the southern region to US$4.58 in Mato Grosso in central Brazil. High transport costs and interstate taxes manage to maintain this difference.

Surviving producers are feeling relief but will be considering their future in the activity carefully. Recent years have seen long periods of crisis and short periods of relief, with a tendency to quickly reduce equity. After two years of study, the government monopoly body has finally approved the fusion of two of the biggest Brazilian pork industries, Perdigão and Sadia, with conditions attached. If the companies fulfill these conditions, they will trade as BR Foods, which will be a major player on the global food market. The trend towards consolidation and concentration among hog industries is bad news for independent producers who have less and less sales options, particularly in the South. This leads to price volatility and, in really bad moments, a total lack of hog buyers in some regions. This is the producer's worst nightmare, and thus many are reconsidering their future: cut back or abandon production, or seek a contractual arrangement with one of the industries to produce grower piglets.

Genesus Global Market Report
Prices for week of 25 July 2011
Country Domestic price
(own currency) US$
(per pound liveweight)
USA (Iowa-Minnesota) 99.68¢
US$/lb carcass 73.76¢
Canada (Ontario) 1.78
C$/kg carcass 64.90¢
Mexico (DF) 21.98
MXP/kg liveweight 84.39¢
Brazil (south region) 2.54
BRR/kg liveweight 73.50¢
Russia 95
RUB/kg liveweight $1.55
China 19.03
RMB/kg liveweight $1.33
Spain 1.27
€/kg liveweight 82.12¢

[Mustang Sally Farm]

Wednesday, August 10, 2011
Mexico Manages Effects of Prolonged Drought
MEXICO - Rain during July and August, as well as government support, will be key to the livestock sector's output for the second half of 2011, according to the latest GAIN Report from the USDA Foreign Agricultural Service.
 

Prolonged drought in Mexico has boosted slaughter and live exports for 2011 as the livestock sector seeks to avoid additional animal losses. Reduced availability of feed, fodder and higher grain prices (domestic and international) continue to pressure the livestock sector; thus, precipitation during July and August, as well as government support, will be key factors driving the sector's output for the second half of 2011.

Current situation
From January to March 2011, Mexican cattle exports to the United States surged 23 per cent compared to the same period last year.

Different sources have confirmed with FAS that live cattle exports during this quarter were driven by higher prices paid by US feedlots compared to Mexican feedlots. Additionally, a prolonged drought resulted in more exports of younger animals (330-400lbs) from northern states because of the attractive prices. However, unofficial data in USDA-Agricultural Marketing Service’s (AMS) weekly Market News report ‘Mexico Cattle to US’. Imports suggests that the flow of cattle to the United States tapered during June and July.

Even though no official data has been released, FAS estimates that Mexican cattle slaughter was approximately 1.5 per cent higher during the first five months of 2011 when compared to the same period in 2010, based on information provided by contacts and normal population growth.

The current concerns of the livestock sector, especially producers located in the northern states of Mexico, are a combination of:

adverse effects of the February frost resulting in poor quality grasses at the beginning of the year,
higher international grain prices, and
a prolonged dry season damaging the remaining grasslands and grain crops.
The Mexican Government has publicly stated that rains are expected to resume later this year, though sufficient rains are expected and sowing for the upcoming grain crops is progressing at a good pace. Thus, there is no concern at this time about the future availability of domestic grain and pasture supplies.

Poultry and pork sectors
For the poultry sector, some private sources have expressed to FAS that broiler production will continue increasing. Thus, the consumption of grains – primarily sorghum – will maintain the current increasing trend. The poultry sector will principally obtain grains domestically but also from imports (despite high grain prices). In addition, some contacts have stated that the profit margin for broiler production continues to cover the increased costs of production attributable to grains. Moreover, producers use more price risk management tools for grain purchases.

On the other hand, the pork sector is facing consolidation due to the higher production costs as a result of higher grain prices. However, grain demand by large- and medium-sized producers seems to be covered mainly by domestic sorghum and wheat that is being diverted from the export channels and, when necessary, imported.

Consequently, the poultry and pork sectors are expected to continue increasing their demand for both domestic and international grains at any price.

[Mustang Sally Farm]

Friday, August 12, 2011
Measures to Increase Chilled Pork Belly Imports
SOUTH KOREA - The price of pork belly meat – the most popular pork cut in Korea – has gone through the roof in recent months due to local shortages resulting from the country's devastating outbreak of foot and mouth disease (FMD) when more than three million pigs, equal to one-third of total inventory, were culled.
 

A report from the USDAS Foreign Agricultural Service says that the average retail price for domestic fresh bellies in July 2011 was 23,730 won/kg, up 43 per cent from November of last year, just before the FMD outbreak.

In response, the Ministry of Strategy & Finance, which is leading the interagency charge to curb rising consumer inflation, has cut the duties on 260,000 metric tonnes of imported bellies and other pork cuts on several occasions to help stem the pain at the register.

With the current duty reduction, imported belly meat is currently selling at less than half the price of domestic bellies at 11,500 won/kg for fresh and 8,500 won/kg for frozen.

Nevertheless, retail belly prices remain at historic highs.

In addition to the tariff cuts, the Ministry for Food, Agriculture, Forestry & Fisheries (MIFAFF) announced on 19 July support measures to jump start imports of fresh and chilled belly meat in hopes of lowering domestic prices.

The MIFAFF measure is focused on fresh/chilled belly meat for two main reasons. First, Korean consumers prefer fresh bellies over frozen, especially during the summer grilling season. Second, importers are reportedly having a tough time securing bellies on the international market.

The measure contains five main pillars to help lower fresh/chilled belly meat prices:

price support incentives;
incentives for contracting under the emergency government purchase of 10,000 metric tonnes;
the domestic selling price on the government-purchased meat would be cut by about 10 percent;
support payment to offset air freight expenses for imports outside the emergency government purchase; and
request to consumers to eat other pork cuts and local beef.
These incentives are effective until 20 August.

With respect to price support incentives, the Korea Agro-Fisheries Trading Corporation (aT), which is the government-run state trading entity, will temporarily act as middleman in the transaction between the importer and customer.

In particular, aT will pay the importer the contracted price and will then sell the meat at a discount to the customer depending on prevailing domestic prices and when the product arrives in Korea.

On 21 July, aT opened an emergency tender for 10,000 metric tonnes of chilled belly meat, which will more or less be a consolidated purchase on behalf of the local importers.

The tender closed on 26 July.

The product will be sold at about a 10 per cent discount to local buyers, depending on the prevailing market price when the product is released into the market.

There are a couple reasons for making the purchase in this fashion.

First, the government wants to publicly demonstrate its deep-seated resolve to fight inflation by making such a large purchase.

Second, some importers were reportedly worried about customers, who knowing that the product had a limited shelf life, were holding out for a discount.

According to local trade sources, only a portion of the 10,000 metric tonnes tender will likely be filled because of the limited exportable supplies of fresh belly meat in the United States, Canada and Chile.

Producers in these countries make more money by producing bacon and spare ribs from the belly. Please refer to pork import statistics at the end of this report for more details.

The measure urges Korean consumers to eat other pork cuts, like Boston Butt and tenderloins.

It also calls for consumers to eat more beef to help prop up sagging cattle prices due to the record cattle inventories.

However, changing dietary patterns even when prices are high takes time.

[Mustang Sally Farm]

Friday, September 02, 2011
Spanish Hog Market – Tough Times
SPAIN - The summer is getting its end, tourists are leaving the Spanish beaches and consequently the Spanish pork market has started to decrease, writes Javier Santamartina from Sales and Services, Genesus, in Spain, Portugal and Italy.
 

This is a regular higher demand over the 22-week cycle every year. The good news is that this year, the drop in prices seems to be less dramatic for producers than previous years.

A different story to tell is the cost of production, severely affected by enormous price increasing on grains. This situation has caused great discomfort among the producers and the market is apprehensive. The margins in most of the cases have touched the break-even point or a little bit higher with a lot of producers still surfing on uncharted waters of negative margins. Spanish net pig farm income is expected to close the year with red ink on higher prices for grain. There are also others factors involved. On the other hand, finishers are happy buying 23-kg pigs at record low prices now; they have been sold under their cost of production over the last few weeks.

A study by Rabobank, a reliable source in the animal protein industry, (Note Rabobank 268) estimates how feed cost in Spain is the highest in the the EU and higher than in the US and Canada. We always watch at these studies cautiously because of diverse levels of production in Spain, but one thing is clear: grain prices in Spain have cancelled out any expected income as a result of higher pork prices. It is hard to compete in these times with other European countries that are natural competitors in this market place. It is true that other costs are lower too, such as fixed costs and labour.



Cost price comparison for pork for selected EU countries, 2009 (€/kg)
Source: Rabobank estimated based on interpig, USDA, 2010
The same study reveals a drop in pork production of 1.2 million tons in the EU, partly due to animal welfare regulations that will be completely effective in 2013. It also suggests that the adjustment will be made mainly in countries that rely on grain imports, like Spain. In the case of the Spanish pig industry, it suggests two production models: number one, large corporations filling retail chain stores; and number two, smaller independent producers working to meet the domestic demand of processed meats. This latter segment is one of the most affected in the industry due to lower demand cause by reduced family income.

Summary
We are living in tough times, just expecting some step up in pork prices. If reduction on cost of production comes first, it will be welcome as well for the fall-winter season but this scenario is unlikely. The good news is prices are falling at a moderate rate compared with other years, but unfortunately it does not help to bring some break with better profit to an industry in distress.

The future brings two big questions. Firstly, what will be the effect on the European herd as a result of the new animal welfare and environmental regulations in 2013? And second, when we will real margins return to Spain’s pig production?

Genesus Global Market Report
Prices for week of 22 August 2011
Country Domestic price
(own currency) US$
(per pound liveweight)
USA (Iowa-Minnesota) 94.52¢
US$/lb carcass 69.94¢
Canada (Ontario) 1.86
C$/kg carcass 67.82¢
Mexico (DF) 21.95
MXP/kg liveweight 79.40¢
Brazil (south region) 2.23
BRR/kg liveweight 63.52¢
Russia 95
RUB/kg liveweight $1.48
China 19.90
RMB/kg liveweight $1.41
Spain 1.22
€/kg liveweight 79.54¢



 

[Mustang Sally Farm]

Hong Kong – Livestock and Products Annual
Hong Kong's imports of US pork and offals are expected be 32 per cent lower this year than in 2010 as the result of a continued decrease in US pork exports transshipping through Hong Kong, according to Caroline Yuen and Juliana Madrid in the latest GAIN report from USDA Foreign Agricultural Service.


Executive Summary
US pork exports show good prospects for growth in Hong Kong’s domestic market, greatly benefiting from the Hong Kong dollar’s peg to the US dollar (US$1= HK$7.80). Products from other major competitors have become more expensive as a result of their currency appreciating against the US, and thus, Hong Kong dollar. US pork products continue to sell favourably in high-end markets. The use of Chinese cuts has helped increase sales for US pork products used in Chinese restaurants. Nevertheless, competition remains tough in an open market like Hong Kong. Chilled pork products face increasing competition from premium pork products supplied by Spain and Japan.

Despite the favourable domestic market, Hong Kong’s 2011 imports of US pork and offals are expected to drop to $190 million, a 32 per cent decline from $278 million in 2010. The decline is due to the continued expected decrease in US pork exports transshipping through Hong Kong.

Hong Kong’s trade is very volatile due to the re-export trade. In the first half of 2011, Hong Kong imported $27 million in US pork products and $67 million in offals. During the same time period, Hong Kong’s pork and offal re-exports amounted to 28 per cent and 75 per cent of total imports, respectively. The high export percentage, particularly for offals, highlights the fact that Hong Kong remains a key re-export centre for the Chinese market.

China and Brazil are the two leading pork suppliers to Hong Kong. Currently, Hong Kong importers are very reluctant to source Chinese pork because it is considered too expensive. Brazilian products are more popular in terms of prices and supply. Recently, importers said they were given very competitive offers when Russia imposed a ban on pork imports from certain Brazilian plants.

Hong Kong is experiencing inflationary pressure. From July 2010 to July of this year, the average retail price for pork rose nearly 26 per cent. In a bid to combat inflation, price-conscious consumers are replacing freshly slaughtered pork with Chinese chilled or even frozen pork.

Production
Pig production is expected to reach 1.63 million head (114,000 metruc tons; MT) in 2011 and 1.67 million head (116,000MT) in 2012, five per cent and three per cent, respectively, lower than the 1.72 million head (120,000MT) in 2010. This decline is due to ongoing high pig prices in China, which make exports to Hong Kong less attractive. Presently, China supplies over 94 per cent of the pigs for slaughter in Hong Kong, while local farms supply the remaining six per cent. Thus, a reduced supply from China would have a significant impact on local production.

The July consumer price index report for China revealed a 14.8 per cent year-on-year rise on overall prices, with pork having risen 56.7 per cent. To some extent, these figures are telling of the stringent supply of live pigs in China. Since over 94 per cent of Hong Kong’s live pig supply comes from China, the local live pig market inevitably suffers spill-over effects from the rising prices and stringent supply of the pig industry in China.

In June of this year, Hong Kong’s average import price for live pigs rose by 38 per cent compared to June 2010, a rate less than that of China’s pork prices (56 per cent) as Hong Kong agents buying live pigs from China have been unwilling to offer higher prices. On the other hand, Chinese pig traders experiencing a bullish domestic market have little incentive to sell their pigs to Hong Kong. As such, the supply of pigs to Hong Kong has been declining and may continue to decline as the situation in China is expected to continue in 2011 and 2012.

Local pig farming began to drop significantly in 2007 following a government buy-out plan of operation licences in an effort to reduce local pig farming. Hong Kong’s self-sufficiency ratio declined from 23 per cent in 2006 to six per cent presently. Since the buy-out scheme has ended, further significant decreases in local pig production are not expected, as farmers who declined the government’s reimbursement offer are likely to remain in the industry for the immediate future. These farmers may be further encouraged by the developing niche market for locally raised pigs. Some retail outlets are encouraging this niche market by specifying where their pork comes from. In Hong Kong, there is the general perception that local pigs are less likely to be subject to unnecessary hormone treatments.

On average, live pigs from China are smaller, weighing about 68kg, whereas those raised locally weigh 86kg on average. Given the appreciation of the Renminbi, rising import prices, and Hong Kong’s inflation, the wholesale prices of live pigs between January and May 2011 reached $2,919 per MT, representing a rise of 29 per cent compared to 2010.

Consumption
Hong Kong’s pork consumption pattern has been affected by escalating inflationary pressure. Once consumers get accustomed to a new consumption pattern, it is very likely that this behaviour will continue even when inflation subsides. This July, the year-on-year inflation rate was recorded at 7.9 per cent, the highest after August 2008. Aside from housing rentals, food was the largest driving cause for inflation with a 7.4 per cent year-on-year increase. Pork was among the food items that experienced the most noticeable price increase. The average retail price of pork in July 2011 was 26 per cent higher than that in June 2010. In response to increasing prices, industry sources confirmed that both consumers and catering services have modified their pork consumption.

The most noticeable change is in the sharp shift from freshly slaughtered pork to chilled pork from China. Chinese chilled pork was introduced to Hong Kong as an alternative to freshly slaughtered pork and its sales have been expanding gradually over the years. The rising cost of food has served as a catalyst in accelerating this shifting process. In Hong Kong, there is about a 10 per cent price difference between freshly slaughtered pork and chilled pork from China. Although the overall pork prices in China are on an upward trend, chilled pork prices are not as volatile as live pig prices. The price volatility for live pigs is due to the supply of live pigs being largely confined to the Guangdong province (adjacent to Hong Kong), whereas the chilled pork supply has less of a geographical restriction.

In a bid for lower prices, a similar shifting in consumer preference is taking place between Chinese chilled meats and frozen meats. Hong Kong retail outlets have seen a sharp increase in the consumption of Brazilian frozen pork. Ribs and pork chops are popular Brazilian cuts.

Given the strong exchange rate of Renminbi and the rising pork prices in China, Brazilian products have become more competitive and attractive at the expense of Chinese chilled and frozen pork.

Hong Kong’s inflationary pressure will remain notable. To avoid the upward price pressure, the shift in consumer preferences is very likely to continue in the coming year.

One distinct advantage for US chilled pork is the stable exchange rate. Additionally, US pork products enjoy an established premium market image associated with its taste and safety. US chilled pork, primarily consumed by the well-to-do consumers and upscale catering services, continue to sell well despite high prices. However, the coming years will be challenging for US chilled pork products because many traders are gradually introducing premium chilled pork from other countries. The most noticeable is Spanish Iberico pork and Japanese Berkshire pork. Both pork types are being well received in the market. Australian and Canadian pork are also making inroads to upscale markets. Currently, Australian and Canadian pork exports are disadvantaged by the high exchange rate, but they are likely to build on the Hong Kong consumers’ receptiveness to new food products.

There has not been any significant consumer shift towards different types of meats as a result of rising pork prices, because other meat products are facing similar upward trends in price. More importantly, pork and chicken are staple meats consumed by the Hong Kong Chinese.

Trade
US supplies
US pork and offal exports to Hong Kong in 2011 are forecast at $190 million, representing a significant drop of 32 per cent. This forecast is based on increasing direct US exports of pork and offals products to China. In efforts to cut transaction costs, many US pork exporters have decreased their transshipments through Hong Kong. In the first half year of 2011, US pork and offal exports to China increased tremendously by 2,234 per cent reaching $147 million, while its exports to Hong Kong declined by 55 per cent shrinking to $67 million. As a large portion of Hong Kong’s imports are re-exported – 28 per cent and 75 per cent for pork and offals, respectively – any decline in re-exports will inevitably affect total imports significantly.

As of 2010, the US was the third largest pork supplier to Hong Kong. As a result of the increasing direct exports to China, the US is now the fifth largest supplier to Hong Kong after China, Brazil, Spain and Germany. In the first half year of 2011, Hong Kong imported a total of $27 million in pork products but the import value of offal was as high as $67 million. Both chilled pork and processed pork, primarily consumed in Hong Kong, showed a remarkable increase. On the other hand, Hong Kong’s imports of US frozen pork and variety meats declined as they are most affected by the changes in re-export trade.

Removing the re-export trade, US pork products have performed very well in the domestic market. US exports have benefited tremendously by the pegged exchange rate, particularly when the Hong Kong currency has depreciated against the currency of other major suppliers such as China and Brazil.

From January to June 2011, Hong Kong’s imports of US chilled pork rose to $2 million or 113 per cent compared to the same period in 2010. The strength of US pork is rooted in its established market image of high quality and food safety, in addition to the benefited the stable exchange rate with the Hong Kong currency. US chilled pork sell primarily to high-end retail outlets and five-star hotels.

As mentioned in the previous section, US pork is facing competition from high quality pork supplied from Spain, Australia, and Canada. Industry sources indicated that Canadian pork is also doing very well as a beginner in the market. Despite their slow acceptance in the market, industry sources believe Canadian pork has great potential. It is also worth noting that chilled pork from Thailand has enjoyed significant growth. Given the more economical pricing and comparable quality, importers view it as a good value for their money.

US frozen pork products, including premium frozen pork parts and commodity cuts, are expected to perform well for the remainder of 2011 and 2012. In addition to the high value US loin cuts which have been traditionally well accepted by the high-end catering industry, other cuts like butts are being gradually introduced to Chinese restaurants. For example, pork butts are being used to prepare traditional Chinese pork roast. Wider acceptance of US pork by Chinese restaurants offers good opportunities for US pork exports. After all, Hong Kong’s catering industry is dominated by restaurants highlighting Chinese cuisine.

Other suppliers
China is the largest supplier of pork to Hong Kong. It accounts for over 86 per cent of all chilled pork supplies to Hong Kong. Chinese chilled pork is primarily used as an alternative for freshly slaughtered pork and is not a direct competitor of US chilled pork. Despite the increasing substitution of freshly slaughtered pork for chilled pork, Chinese chilled pork is expected to decline in 2011. This decline is partly due to some consumers and catering services replacing chilled pork with frozen pork as a result of escalating pork prices from China.

Presently, there is not a significant amount of Chinese pork coming into Hong Kong because it is considered too expensive. This trend will continue for the remainder of 2011 and is likely to continue in 2012 because Chinese pork prices are not expected to drop significantly in the near future. Chinese frozen butts used to be very popular for making Chinese pork roast, but many end-users are now opting to use Brazilian products. A similar shift is happening with many other cuts. On the whole, prices are a determining factor in all purchasing decisions particularly for commodity cuts.

Brazil is the second largest supplier of pork to Hong Kong. Just in the first half of 2011 Brazil had a 26 per cent increase and sales are expected to continue to rise in the near future. There are several underlining reasons for the success of Brazilian pork. According to industry sources, as a result of the Russian ban on Brazilian pork they saw an influx of Brazilian pork products enter Hong Kong at very competitive prices. This surge in Brazilian supplies has made up for the limited supplies of Chinese pork. Furthermore, Hong Kong buyers are very familiar and comfortable with Brazilian cuts. Brazilian pork is considered to be lean and well-trimmed.

Re-exports
Hong Kong continues to serve as a centre for re-exporting products to China. Over 28 and 75 per cent, respectively, of pork and offals imports to Hong Kong were re-exported and China is the key market.

Hong Kong’s re-export trade to China is dominated by offals. The US is a key supplier of pork offals to Hong Kong. A distinct advantage of US products is their abundant supplies. When buying from a US supplier, an importer can place a large order from one US plant, whereas the importer would have to deal with several European buyers in order to source the same quantity. Therefore, importers prefer to go to US suppliers. This advantage has also allowed US offals to sell well in Hong Kong.

Nonetheless, in the near future, European pork offals exports to Hong Kong are expected to increase because the Chinese government is increasingly approving more European pork products and registering more plants. While importers noted that this trend does not necessarily reduce the demand for US offals because of the large scale of the Chinese the market, Hong Kong’s imports of US products are highly affected by direct exports to China.

Policy
Ractopamine is not an issue in Hong Kong. Hong Kong food laws do not prohibit or restrict the presence of ractopamine in meat products. As such, pork trade has not been affected by this issue.

[Mustang Sally Farm]

Brazil Has Fastest Food Export Growth Rate
BRAZIL - Brazil’s processed food exports are showing the fastest rate of growth among the world’s major food producers.


The fifth largest international exporter, Brazil registered an increase in the sales of these products to foreign countries of 4.8 per cent per annum for the period 2005 to 2010.

According to the GTIS (Global Trade International System), the other four producers ranked above it showed weaker growth for the same period: the US – 12 per cent, the Netherlands – 7.7 per cent, France – 5.6 per cent and Germany – 8.2 per cent.

In addition to this rate of growth, Brazilian processed food and drink exports, which reach 197 countries and accounted for US$38 billion in 2010, possesses great diversity and is also growing in quality.

Coordinated by Apex-Brasil (the Brazilian Trade and Investment Promotion Agency), the Brazilian delegation to ANUGA – the world food trade fair being held between 8 and 12 October in Cologne, Germany – comprises 70 companies representing 12 sectors: beef, pork, chicken, coffee and teas, biscuits, sweets, beverages, juices, fruit, regional foods (typical Brazilian cuisine), seasonings and condiments, and food preparations.

These are sectors in which Brazil stands out and is high up in the world production and exporting rankings, not to mention offers high quality and sophisticated products that reflect an increasing concern in the industry with environmental sustainability and the health and well being of consumers.

Apex-Brasil is reinforcing its efforts made in conjunction with these sectors to promote the country’s exports by sponsoring the Brazilian presence at ANUGA. The Agency sustains export promotion projects for 80 economic sectors, benefitting 13,000 national companies.

Pork: exports are growing
Brazil exported 540,000 tons of pork in 2010 with resulting revenues of US$1.34 billion, an increase of 9.32 per cent over the year before.

The most widespread source of animal protein in the world, global production stands at 100 million tons, half of which is produced in China, with the majority of the rest produced by the EU, US and Brazil – the fourth largest producer and exporter.

The country is responsible for three per cent of worldwide production, 11 per cent of exports and has been a growing presence in the international market.

Over the last decade, its exports have been growing quickly, going from four per cent to 11 per cent of the global total. In 2008, it exported 530,000 tons and achieved record sales of US$1.4 billion.

Brazil has been seeking out new export markets for the product, complying with the various sanitation, nutritional and organoleptic (colour, flavour, odour and texture) standards.

[Mustang Sally Farm]

Mexico Hog Markets
MEXICO - With Mexico's GDP currently forecast to increase by 4.1 per cent in 2011, pork producers are also gearing up for an improved year as demand returns in many sectors, writes Fernando Ortiz from Ibero-America Genesus.
 

With demand for meat, and protein products set to grow as incomes rise, consumption of feed grains is also increasing.

Concerns have, however, been growing about price inflation as the costs of food, fuel and electricity prices have increased. In the first two quarters, 2011 the sharp spike in corn futures on the global market led to fears of a new 'tortilla crisis' in Mexico. In an attempt to keep corn prices in check, the Mexican government hedged against corn price inflation, buying futures contracts to fix the price of corn on behalf of tortilla makers and other domestic processors.

Unexpected frosts in the northwestern state of Sinaloa in February 2011 have hit the Mexican corn crop, with the agriculture ministry warning of losses of a projected 1.8mn tonnes. Despite this setback, BMI still forecasts corn output to reach 23.98mn tonnes in 2010/11, a y-o-y rise of 17.7 per cent.

The threat of a new 'tortilla crisis' has also been averted by the government's decision to raise spending on a grain hedging programme, which will provide financial support of about MXN8.5bn (US$700mn) in subsidies to farmers, the food industry and grain traders to hedge risk through purchase futures options on the Chicago board of trade.

On another resolved issue two weeks ago resolution of a long- simmering dispute between the US and Mexico over long-haul, cross-border trucking represents a milestone in the economic integration of North America. US pork producers, cheese and other goods, are now looking forward to reduced Mexican tariffs with the resolution of the trucking deal. The retaliatory duties have been declined and this is going to be positive for enhance American pork sales.

The National Pork Producers Council has been urging the Obama administration to resolve as quickly as possible the trucking issue, which erupted in March 2009 when Mexico placed higher tariffs on an estimated $2.4 billion of US goods after the US Congress cut off funding to renew a pilot programme that let a limited number of Mexican trucking companies to haul freight beyond a 25-mile US commercial zone.

"This is great news for the US pork industry, as well as for other sectors affected by Mexico’s retaliatory tariffs," said NPPC President Sam Carney, a pork producer from Adair, Iowa. "Pork producers have been hurt by this retaliation.

"So we’re grateful to President Obama, Transportation Sec. Ray LaHood, USTR Ambassador Ron Kirk for their efforts in reaching this agreement with Mexico. We’re also grateful to President Calderon and his administration for their efforts on this issue."

The end of the trucking dispute will help. Transporting goods across the Mexican border is a complicated business, involving customs brokers, warehouses and lengthy inspections for drugs and illegal immigrants. Under the current system, Mexican truckers haul their merchandise to the border, where a transfer truck takes it across. A US truck picks it up on the American side. In time it will be possible for a Mexican driver to haul goods directly from any Mexican city straight through to Phoenix or even all the way to Boston. (They will be prohibited from handling shipping within the US) Such efficiencies will yield savings to US businesses and consumers.

The last crisis in the pork industry in Mexico as in the USA, Mexican producers have been losing money in large amounts for a period probably six to eight months longer than those in the USA or Canada.

The southern and central parts of Mexico largely produce to serve the domestic markets in large cities such as Guadalajara and Mexico City. Much of the Sonora area produces pork both for domestic consumption and a sizeable portion for export. Sonora uses corn from the United States and buys it at west coast prices so their price per bushel is over a dollar higher than in the Midwest USA. Many producers have switched to sorghum as a replacement for wheat or corn.

Unless a producer is aligned with a plant that is exporting, the typical way selling is done is on the cash market through intermediaries (like order buyers for cattle). These guys know the plants, prices and where opportunities are and bid hogs to supply those opportunities. Often little feedback is given about quality, but poor quality production is bid down by the buyers as it was in the USA before grids were widely in use. Often a range of acceptable weights, such as 110-120kg (240-260 lbs) is given and producers must weigh hogs to hit that range. While leaner hogs are desired, payments based on lean are not usually explicit and sometimes is confusing to understand different measurements in different states.

Newer and larger units operate all-in all-out, but the predominant production is continuous flow, though frequently on separate sites. The hot season is coming in the Sonora (July, August) when temperatures often reach 120F or hotter during the day. Many producers report pigs lose weight in the month of July despite misting and ventilation to reduce heat.

Many producers are multi-meat or poultry producers, especially in the Jalisco area. It is not unusual to have layers, broilers, hogs and some cattle--all at decent scale. Just like the USA, eggs and milk in Mexico have increased in cost dramatically in the last year which it was offsetting the hog loss problems for these producers who are diversified. Mexican red meat consumption is forecast to increase in 2011 as the economy and consumer purchasing power recovers.

Hog prices in Mexico have spiked over the last quarter as a reflection of higher feed costs passed onto consumers. But the higher hog prices are not only because of high feed costs but also because the national breeding herd has shrunk by 30 per cent in the last 3 years causing a current shortage of pork in the domestic market. These two factors paired to an increased consumption and improving of income of the population have resulted in better prices for the producer. However the giant black cloud ahead continues to be the volatile prices of grains in international markets. Today’s hog prices have been drop a little bit compared with the last report, typical ($21.80 MXN/kg) 74 US cents per pound in Mexico City and cost of production around ($18.50 MXN/kg) 71 US cents/lb. However there are some hopes of price dropping for grains as well in the coming weeks. From our perspective we cannot perceive any significant expansion on the Mexican swine herd over the next few months.