Pig Meat in Australia: Outlook to 2017–1808 March 2013
Australian pig meat production is forecast to fall by two per cent in 2013–14 to around 340,000 tonnes and then to increase gradually over the medium term to around 360,000 tonnes by 2017–18, according to Clay Mifsud and Caitlin Murray in the latest quarterly 'Agricultural Commodities' report from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).
A number of factors have affected the Australian pig industry in 2012–13, including increased feed costs and growing import competition. The weighted average over-the-hooks price of pigs is forecast to average around 280 cents a kilogram in 2012–13, largely unchanged from the average in the previous year.
During the first half of 2012–13 the pig-to-wheat and pig-to-barley price ratios averaged 25 per cent and 22 per cent lower, respectively, leading to a decline in profitability compared with the same period in 2011–12. During the first half of 2012–13, pig meat imports increased by 11 per cent, compared with the same period in 2011–12.
In 2013–14 grain prices are forecast to ease but slaughterings are expected to fall due to a decline in breeding sow numbers. The lower pig meat production is forecast to lead to the weighted average over-the-hooks price of pigs increasing by four per cent in 2013–14 to 290 cents a kilogram. However, over the medium term, pig prices are projected to decline gradually, to 246 cents a kilogram by 2017–18 (in 2012–13 dollars). Downward pressure on pig prices over the medium term reflects a projected gradual increase in domestic fresh pig meat production, and increased competition from imports in the processed pig meat market.
With the Australian dollar assumed to remain relatively strong over the medium term, demand for imported processed pig meat is projected to rise.
Production to Fall in Short Term, Rise Over Medium Term
Australian pig meat production is forecast to fall by two per cent in 2013–14 to around 340,000 tonnes. This forecast fall in production reflects declining breeding sow numbers in response to significantly higher grain prices in 2012–13 and increased competition in the processed meat sector from imports from North America and the European Union.
The Australian pig herd fell by six per cent over the 12 months to June 2012 to 2.2 million head, the lowest in 40 years.
(f = ABARES forecast)
Australian pig meat production is projected to increase gradually over the medium term to around 360,000 tonnes by 2017–18. Lower projected prices of feed grains, which account for about 55 per cent of production costs, are expected to support a partial recovery in pig numbers and pig meat production.
Over the medium term, more domestic production is expected to be directed to the fresh pig meat market. This is under the assumption that the fresh meat market will remain closed to imports because of biosecurity restrictions, while the processed pig meat sector will remain open to competition from imports. Under Australian biosecurity law, all imported uncooked pig meat must be processed before sale, usually into bacon, ham or smallgoods.
Australian per person pig meat consumption increased by 20 per cent over the 10 years to 2011–12 to an average of 25kg. Pig meat imports, as a share of domestic consumption, have grown from 23 per cent in 2002–03 to an estimated 49 per cent in 2012–13.
Over the medium term, average per person consumption of pig meat is projected to rise to 27kg by 2017–18. A significant proportion of this projected increase in consumption is expected to be met by imports.
(f = ABARES forecast)
Imports to Rise Over the Medium Term
The pig meat industry is the only Australian meat sector to have been under competition from significant imports. Over the 10 years to 2011–12, pig meat imports increased from 47,000 tonnes to 142,000 tonnes.
Australian pig meat imports are forecast to increase by seven per cent in 2012–13 to 152,000 tonnes (shipped weight) and a further nine per cent in 2013–14 to 165,000 tonnes. Higher imports reflect the price competitiveness of Danish middles and North American legs used in the Australian processed pig meat sector.
Additionally, the assumed high value of the Australian dollar is expected to result in imports remaining competitive. Over the medium term, pig meat imports are projected to reach 180,000 tonnes by 2017–18.
(f = ABARES forecast)
Exports to Rise Marginally Toward 2017–18
Australian pig meat exports are forecast to fall by 10 per cent in 2012–13 to 26,000 tonnes (shipped weight), and a further five per cent in 2013–14 to 25,000 tonnes.
Despite an assumed gradual depreciation of the Australian dollar toward 2017–18, Australian pig meat exports are expected to remain less competitive in many export markets, particularly against pig meat from the world's three largest pig meat exporters - Denmark, the United States and Canada.
Over the medium term, Australian pig meat exports are projected to reach about 28,000 tonnes by 2017–18.
(z = ABARES projection)
a Dressed weight. b In 2012–13 Australian dollars. c Shipped weight. d Excludes preserved pig meat.
f = ABARES forecast; z = ABARES projection.
Sources: ABARES; Australian Bureau of Statistics
Further ReadingYou can view the full report by clicking here.