Porto Alegre, February 22, 2024 –The US Department of Agriculture (USDA) released its global meat sector report on the 12th with revised estimates. The most important figures are about China, a player that can influence the dynamics of several markets around the world, as it is the largest producer, consumer, and importer. But it is also worth paying attention to the numbers from the European Union and the USA, markets that compete for exports with Brazil.
USDA brought some important changes, starting with revisions to Chinese estimates for 2023. The department reduced the herd by accelerating slaughter, increased production from China, and reduced imports, which is in fact in line with the severe crisis in local pig farming. The large supply has put pressure on prices for months in China, and weakened imports, with tougher negotiations on the price per ton, which can be seen in the results of Brazilian pork exports over the last few months. For 2024, USDA shows a reduction in production, herd, and slaughter, so the price reversal in the Chinese market should begin at some point in the second half of the year, as soon as supply decreases, highlighting that it is still quite high. However, it is worth noting that the Chinese economy has slowed down, with household confidence negatively impacted, which could delay the process a little.
USDA pointed to China’s 2023 production at 56.9 mln tons, being the second highest in the historical series that began in 1960 and above the 56.5 mln tons indicated last October. Slaughter has advanced over the last few months, a natural movement, considering the increase in the sector’s losses in recent months. For 2024, the forecast is 55.2 mln tons, down 2.99%. Those farmers with less financial power and less efficiency made a higher level of animals available for slaughter, and many ended up quitting the activity. Furthermore, there are rumors of an acceleration in slaughter due to issues related to animal health. Professionalization in Chinese pig farming will continue to advance, and the market share of large companies will be greater, especially after the crisis.
This year’s decline in production is natural, considering that China’s pig herd in 2023 was estimated at 423.6 mln head, a decline of 6.4% compared to the 452.6 mln head registered at the end of 2022. For 2024, the estimate is 398.4 mln head, down 5.95%, being the second smallest herd since 1997. Since then, only in 2019 the herd was smaller due to African swine fever (ASF). As for the matrix herd, the initial position for 2024 was put at 41.2 mln head, down 4.19% from the 43 mln head signaled in 2023. With the decline in the herd, the scenario for strong prices in China is also expected in 2025, and with this, the country’s imports should have a better advance, which is beneficial for Brazil. However, Brazilian pig farming must pay attention to the level of production, since it is already large and should not seek growth just by looking at the future Chinese scenario.
For consumption in China, USDA pointed to 57.34 mln tons in 2024, against 58.73 mln tons last year, down 2.37%. With weak pork prices due to high supply, China should remain cautious in the first half of the year and improve in the second half of the year. Chinese imports for 2023 were estimated at 1.93 mln tons and for 2024 at 2.25 mln tons, an increase of 16.88%. However, it is worth noting that USDA revised last year’s data downward and cut the 2024 number by 50 thousand tons, which in October was 2.3 mln tons. The numbers with the smallest changes in the report occurred during imports.
The summary from China: the severe pig farming crisis is resulting in production cuts, which will lead to a reversal of the sector’s cycle in the not-so-distant future. The large local supply still weighs on prices, but the trend is toward reduction in 2024, and with this, prices will increase, and imports will return to the agenda with greater strength in 2025. The market will be more speculated, not only due to prices throughout the Chinese pig chain but also to the country’s economic scenario, which is fundamental for consumption issues.
European Union: the report once again showed encouraging numbers for the bloc. The production estimate for 2023 was revised to 20.85 mln tons, a decline of 6.41% compared to the 22.28 mln tons in 2022. For 2024, it was estimated at 20.70 mln tons, a slight drop. The tendency is for prices to remain high, both for pork and live pigs in the European Union, which impacts domestic consumption and exports. The bloc will continue as the world’s largest exporter but lose its attractiveness compared to other markets, such as Brazil. European Union exports in 2024 were put at 3.10 mln tons, a number equal to 2023. Looking at recent history, it can be seen that exports in 2020 hit 5.18 mln tons. Since then, a 40.1% decline.
United States: USDA pointed to growth in US production, consumption, and exports. In terms of prices, US pork will be Brazil’s biggest competitor, looking for similar markets, mainly in Asia. For 2024, US production was estimated at 12.694 mln tons, up 2.45% from last year’s 12.391 mln tons. For consumption, USDA pointed to 10.129 mln tons in 2024 and 9.876 mln tons in 2023. With the US economy returning to healthier inflation levels and close to the annual target of 2%, a fall in the US interest rate is expected, which could result in cheaper credit and a favorable environment for consumption. As for US exports, the Department estimated 3.116 mln tons for this year, compared to 3.070 mln tons in 2023, an increase of 1.5%.
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