Production

 Industry Partners


Prairie Swine Centre is an affiliate of the University of Saskatchewan


Prairie Swine Centre is grateful for the assistance of the George Morris Centre in developing the economics portion of Pork Insight.

Financial support for the Enterprise Model Project and Pork Insight has been provided by:



Author(s): Boal, Fiona
Publication Date: January 1, 2007
Country: USA

Summary:

The global pork industry is evolving at a rapid pace. It is characterised by increased levels of global competition, expansion of industrialized production, vertically integrated supply chains and production of differentiated products to meet the needs of increasingly demanding consumers. For Canadian hog producers, gaining an appreciation of the global operating environment, especially the emergence of new hog production regions, is important in assessing the future direction and profitability of the industry and their own enterprises. This knowledge becomes even more acute when considering the current operating environment in Canada; an appreciating currency, high feed costs, labor shortages, processing sector restructuring and ever-increasing government regulation. World pork production has increased more than 37% since 1997, from 74.4 million tonnes to 101.9 million tonnes in 2007. China continues to completely dominate global pork production, whereas the European Union’s (EU) share of total production has fallen from close to 25% in 1997 to 21% in 2007. At a cursory level the profitability of hog production is dependent on six fundamental pillars: access to feed grain; accommodation and other infrastructure costs; regulatory requirements (e.g. environmental legislation); access to, and cost of, capital; labor costs and availability; and management expertise and practices. Likewise, pork processing is dependent on access to raw materials (hogs), labor and capital, management expertise, regulatory requirements, infrastructure, technology adoption and access to end-users. China was undoubtedly the most interesting market for meat in 2007 and it provides a fascinating insight into how the dynamics of production and trade competitiveness can change over a very short period of time. In the Chinese pork market in 2007, the influences of all six drivers of profitability mentioned above were evident. The explosion in meat prices in China attracted widespread media and political attention. In June 2007, China’s consumer price index (CPI) rose to 4% while pork prices jumped a staggering 101%. In the later half of 2007, there was some downward adjustment in pork prices but prices remained well above 2006 levels. What the locals refer to as blue ear disease, thought to be PRRS along with high feed costs and persisting FMD have had a fairly dramatic impact on the world’s largest domestic pork industry. There have been varying reports on the number of hogs that have been culled and what other measures have been put in place to curb the spread of PRRS but it is clear that domestic production in China has fallen. The Chinese government will be investing heavily to revitalize the domestic pork sector. From a political and social perspective, it cannot afford to displace the farmer population at a faster speed than is already occurring, and food security remains a key government initiative. It will likely take a number of breeding cycles for domestic production to show signs of recovery. Look for China to play a bigger role in world grain markets as an importer as it attempts to rebuild domestic production. In the pork industry of next decade, successful industry participants will need to be more efficient and cost conscious to maintain and enhance their competitive position. How and where the handful of animal protein multinationals choose to make investments and subsequently, how these companies choose to utilize their geographically diversified productive capacity, will ultimately determine what new pork production regions emerge and challenge the traditional exporting countries, such as Canada. Continued awareness and analysis of the global pork operating environment will be necessary in determining the future directions of national and regional pork industries.

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