The globalization of the swine industry has caused major changes to national and international swine production over the past decade and these changes are likely to continue. The easing of international trade barriers has meant that less competitive countries are under increasing pressure from imports by more efficient countries with lower costs of production with the real possibility that these highly efficient countries may soon dominate the world swine market. Small inefficient swine operations within these countries are disappearing at an everincreasing rate. However the swine industries of less competitive countries may be protected by internal subsidies, tariff and non-tariff trade restrictions such as market differentiation and disease status.
Structural changes to the global swine industry
CONSUMPTION OF PORK
More pork is consumed than any other meat in the world. In 1998 it represented 39% of the world's total meat consumption compared to 26.5% for beef and 28% for poultry (Pig International, 1999). World pork consumption increased from 34 to 88 million tonnes per year between 1970 and 1999. World population expansion undoubtedly contributed to a substantial portion of this, but average per capita intake also increased from 10 to 14.3 kg/year (Black, 2000). Pork consumption varies widely among countries and regions with per capita intake in 1998 ranging from 2 kg/year in many African countries to 60 kg/year in Germany and Spain (Pig International, 1999). During this same year consumption in the US was 30.7 kg/year, in Brazil 9.3, and in Australia 18.8 kg/year. During this period worldwide consumption of beef remained fairly stable at 9 to 10 kg/year, but consumption of poultry increased from 4.4 to 10.4 kg/year.
An analysis of global meat consumption finds that poultry represents the greatest challenge to increasing the per capita consumption of pork. However there is a great potential for an increase in pork consumption in many parts of the world where it is the preferred animal protein source. As pork production becomes more efficient with a continuing decrease in the cost of production and through the promotion of high quality and specialized products that meet the needs of specific markets, we would expect that the consumption of pork on a worldwide basis would increase.
Structural changes in the swine industry
The structure of the global swine industry has changed at an unprecedented rate over the last decade. Small mixed-production farming operations that produced several different crops and utilized swine to consume by-products or excess grain have given way to large farrow-to-finish units that are dedicated to swine production. In many countries swine production has increasingly become dominated by corporate operations with separate ownership, operating units and geographical locations for each phase of production.
These corporate units are generally completely or partially vertically integrated with dedicated feed mills, their own genetic selection, multiplier units, sow breeding units, nursery and finisher units. These operations practice 3-site production with separate personel that specialize in a particular stage of production. In many cases the production units, packing plants, meat processing, food service units and retail sales outlets are integrated into the same corporate structure.
These structural changes have had a major impact on the size of individual operations in the swine producing countries of the world. The most striking example of this is in the US, where in 2001, industrialization of pig production placed more than 70% of total annual pork production under the control of only 50 producers while 28% was controlled by the largest 10 producers. In 2001, the largest operation in the US had over 710,000 sows (Successful Farming, 2001). In 1960 there were 50,000 swine producers in Australia with an average herd size of 4.3 sows, by 1998 there were only 3,150 swine producers with an average herd size of 97.5 sows (Meo and Cleary, 1999).
Changes in pig performance
During the 1980s and 1990s there was a major global emphasis in pork production placed on leaner, more efficient pigs that met the market demand for less fat and more 'healthful' meat. Under intense genetic selection for fast growing, lean animals there were sizable increases in growth rate and feed efficiency. In the UK feed conversion efficiency improved from 3.60 in 1960 to 2.69 in 1990 (Close, 1999). Between 1990 and 1999 there was only a small improvement in growth and feed efficiency. The growth rate in Australia from birth to slaughter increased from 500 g/day in 1960 to 700 g/day in 1990. Again, as in the UK, improvements in performance during the 1990s were small.
Even with these improvements, there is still a significant difference between the performance of pigs raised in commercial operations and those raised under ideal experimental conditions and environments. Swine raised in typical commercial environments grow 15 to 25% more slowly, are fatter, and are not as efficient as pigs of the same genotype grown in individual pens and in a controlled environment (Black and Carr, 1993; Morgan et al., 1998).
The difference in performance is due to stressors in the environment that result in reductions in feed intake, energy utilization, and protein deposition rate. A number of stressors in commercial operations contribute to this, including group housing of pigs, stocking density, poor air quality, climatic conditions such as sub-optimal temperatures and humidity, and diseases that are increased due to crowded conditions. These stressors increase the release of cortisol, catecholamines and cytokines, which reduce feed intake and protein deposition, but stimulate lipogenesis to result in increased fatty deposition. There is still a significant opportunity to improve performance and carcass parameters in pigs raised in a commercial environment.
Reproductive performance also improved between 1960 and 1990. Litter size and pigs marketed per sow per year increased from 9.8 to 10.7 and 13.3 to 21.1, respectively in the UK (Close, 1999). But, as with pig performance, there has been little improvement in reproductive performance in the last 10 years. Despite the apparent plateau in commercial swine performance, the average values are far below the genetic potential of the animal. There is a significant opportunity for continued improvement in commercial operations that would improve the competitiveness of the swine industry relative to other forms of meat protein.
Comparisons among markets
The 15 major pork-producing countries in 1997 are shown in Table 1 (Pig International, 1998a). Swine production in China far exceeds the production of any other country, with more than six times the number of pigs of the second biggest producer, the US. Brazil is the world's seventh largest pork producer and dominates production in South America, with eight times the production of Chile, which ranks as number two in South America. The import/export of pork between countries depends on a number of factors such as the ratio of the human population relative to the sow population of a given country as shown by Hardy (1998) in Table 2. In most cases those countries with a low ratio of humans to sows are more likely to be pork exporters, while those with a high ratio are more likely to be importing countries. Table 3 (Pig International, 2001) shows the changing patterns of breeding sows and gilts in selected countries as compared to those shown in Table 2. Other factors are also important, because countries such as the US with a high ratio is a net exporter, while China with a low ratio is a net importer. Factors such as efficiency of pork production, product demand relative to the quantity produced, quality of pork demanded in a specific market place, tariff arrangements, and internal subsidies also affect import and export patterns. Environmental restrictions, public acceptance of swine units, and the land area available for pork production are also important factors limiting the size of the swine industry in many countries (Black, 2001).
Table 1. World's 15 largest pig-producing countries in 1997, compared with production in South America and Australia.
From Pig International, 1998a
Table 2. Selected worldwide human and sow populations.
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From Hardy, 1998
Table 4 gives estimates for the cost of producing a kilogram of pork in various countries. The estimates vary depending on the assumptions and time period used by different organizations during the analysis. There is a clear pattern that shows that the lowest cost of production is in Brazil, Canada, and the US. Martin et al. (1998), in an analysis of the costs of production, split costs among feed, housing, labor and interest on capital and showed that costs were greater in Europe than in North or South America.
Table 3. Number of breeding sows and gilts in selected countries in 2001 (x 1000).
Table 4. Estimates by several organizations of the cost of pig meat production in US$/kg carcass for a range of countries.
Adapted from Pig International, 1998b
The analysis showed that the cost of labor in South America was half that in North America, but found the reverse true for the cost of capital. Labor is comparatively cheap in South America but the cost of technology was very high, while technology is cheap relative to labor cost in North America. Brazil would appear to be in a very strong position to increase swine production and become one of the dominant forces in the international pork industry.
Brazil produces large quantities of cheap soybeans and corn, has a low density of pigs, a low current pig consumption per capita and has the ability to greatly increase the number of integrated swine enterprises. Brazil must find a way to overcome excessive bureaucracy, low efficiency of deepwater ports and the need for an agricultural policy to stimulate increased crop production (Pig International, 2000).
Global swine numbers
THE UNITED STATES
The US swine industry is in rapid transition. There are fewer and larger producers that rely more on contracting for both swine production and marketing. Companies that market 5,000 head or more were responsible for producing 80% of the market hogs in 2001. Approximately 150 companies marketing more than 50,000 head annually produced over half of the hogs that go to market in the US. These producers used contract facilities to finish over two-thirds of their production. Approximately 90% of their animals were under contract or owned by a packer. Those producing 50,000 head or more planned to grow their businesses, but a large percentage of this growth would be through acquisition of existing facilities or expansion of their operations outside of the US in Mexico, Brazil, and Eastern Europe. The limits to their growth include environmental regulations, production constraints, increasing cost of production, and decreased profitability, based on the cost of feed, labor, and management of health issues.
Table 5 shows the 15 largest US pork producers, their locations, and the number of sows that they control. This table shows the dramatic geographic shift in production as the sows are leaving the midwestern corn-producing states and moving to the southern and western states. Table 6 shows the 8 largest fully integrated swine producers in the US.
Table 5. The 15 largest commercial swine producers in the United States.
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Successful Farming, 2001
Table 6. Swine Producer/packers in 2001.
Successful Farming, 2001
THE EUROPEAN UNION
Swine production in the EU is at a standstill, with an increasing geographic concentration. The family farm production model is still predominant, but there is a marked increase in the number of larger farms with integration increasing under the influence of the Spanish model. Environmental demands obstruct the further development of traditional swine producing regions, which grew fastest in the past. This will cause a shift in production. indicates the high productivity level of European swine production as compared to other pork producing countries of the world.
In the last 10 years Spain, Demark, Belgium and France have increased their sow herds, where Germany, the Netherlands, and the UK have reduced their herds due to increasing pressure from environmental and social problems. In the EU, pork production increased from 13 million tonnes in 1990 to 18 million tonnes in 2000, for an increase of 34% (Rieu and Ferneij, 2001). Table 7 gives the sow and total swine herd in the European Union between 1990 and 2000 (Eurostat, 2001).
Spain demonstrated the greatest growth (+73% between 1990 and 2000) in the EU. It has had a production surplus since 1993 (112% in 1999). Eighty percent of Spain's production is based on the integration model by large companies. Denmark increased its production by 44% between 1990 and 2000. It exports 80% of its production, making it the leading exporter of pork in the EU. Danish farms are family-owned and are farrow-to-finish operations. France has experienced intense production growth in the last 10 years (42%). Exports have increase in the last few years by 650,000 tons, with 40% shipped to developing countries. The farms are family-owned and medium sized. Belgium has also increased pork production. Farrowing usually takes place on family-owned farms while finishing is integrated and completed by large companies.
Italy is the second largest importer of pork within the EU. The largest concentration of swine production is in the Lombardy and Emiglia-Romana regions with the majority of the production by integrators and large operations. The United Kingdom has experienced a dramatic drop in pork production in the last five years. The national production covers three quarters of the demand with imports at 570,000 tons and exports at 250,000 tons in 1999. One third of the breeding herd in Britain is reared outside. The Netherlands is the fourth leading pork producer in Europe. Two thirds of its pork production is exported within the EU. Growth has been stagnant since the mid 1980s due to environmental regulations. Swine operations are family-owned but large. Germany is the largest pork producer in the EU, with 3.9 million tons in 2000. Domestic production supplies 85% of consumption. German swine farms are familyowned and small compared to the other EU countries (Rieu and Ferneij, 2001). Table 8 shows the pork supply in the European Union in 1999.
Table 7. European Union: total herd and sow herd.
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Source: Eurostat and National sources (2001).
Table 8. European Union: balance of the pork supply in 1999 (in 1000s of tons of carcass equivalent).
**For the EU, trade with third countries. Source: ITP according to Eurostat, national sources.
China is the world's largest pork producer, and the fourth largest producer of beef in the world. One out of every two pigs in the world is located within the border of mainland China. When China becomes part of the World Trade Organization (WTO), tariffs for meat will be lowered and allow entry of new imports into the Chinese market. China represents a growing market for imports of both pork and beef as meat products penetrate secondary cities in China; and the middle class population in urban areas is demanding more consumer-oriented meat products.
There were an estimated 454 million pigs in China in 2001 (Figure 1). The world inventory was approximately 928 million head in 2001. The US had an inventory of 61 million head in 2001. Up to 80% of Chinese production is in small family operations. These family-reared pigs consume scraps or excess crop materials as compared to a grain-based diet that would be utilized elsewhere. Larger size operations with over 100 sows are on the increase in China, but they still represent less than 20% of the total market hog supply. The vast population of China allows the majority of their production to be of the 'backyard' type and still keep China the number one producer in the world by a large margin.
The top supplier of pork to China is the EU (Table 9). The primary import demand is for pork variety meats (80% of current imports), since muscle cuts are not competitive with domestic prices. The lower tariffs that China will fully implement are significant and will decline from the non-WTO duty of 20% to 12% by 2004. Tariffs on processed products will decline from 25% to 18% during this same time frame.
Table 9. Chinese imports of pork and pork variety meats in 2000 (metric tons).
Source: Hong Kong Customs, USMEF estimates.
China produces and consumes over 50% of the world's pork, and pork is the meat of choice in China, making up two-thirds of all meat consumed in China. With increasing incomes, expect per capita consumption to increase. China will import increasing amounts of pork, but such imports will still account for only about 2 to 3% of domestic consumption. But in a market of 1.25 billion people, that is still a great deal of imported pork.
As in the other major swine-producing areas of the world, there is a move in Thailand from small to large swine operations. This trend will continue and should lead to higher quality pork and a greater interest from overseas importers. Ten large operators control most of the increase in current production and the outlook for development is significant. CP, Betagro, Laemthong, and Mittraparp are integrated and account for 20% of the swine production in Thailand. These operations are fully automated and have increased efficiencies of production that will make them competitive in the world import market.
Figure 1. World pig inventory: 1995:2002 (FAO).
The total swine population was 15.44 million in 1999 and had grown to 16.55 million by 2002. In 2003 it is expected to reach 16.76 million. The primary swine-producing area is the central region with approximately 57% of the country's pig population. Only 1% of the pork is exported, and all markets are within Asia.
Thailand produces approximately 10.5 million market hogs/year, with an average live market weight of 100 kg. The total sow population is estimated at 826,087 animals. These sows wean an average of 17 pigs/sow/year. Gilt replacement is at 33%. While these numbers are not at the productions levels of Europe, Canada, or the US, as the integrated operations gain more control of swine production these numbers can be expected to improve at a rapid rate.
The swine business in Indonesia consists of three different systems. Large intensive operations control 20% of total pig population. Medium sized farms have 40% of the population and another 40% of the total swine population is located in backyard operations. All large swine farms are owned and run by people of Chinese descent, and are run as family businesses with all decisions and management controlled by family members. Very few professional managers are hired outside of the families, which makes production changes and improvements in efficiencies very slow. The Indonesian swine industry is currently facing severe challenges due to religious pressure. Because of this pressure all swine enterprises are prohibited from being located near cities or towns. As a consequence of this, producers are being forced to relocate to isolated rural areas. This results in a number of problems such as financial difficulties due to the actual movement of livestock and the building of new facilities, the transportation of market animals to shipping points, and the movement of feed from existing feedmills that may not be located near newly established farms. A shortage of skilled labor is also a major problem. A large number of swine producers are converting to other enterprises such as poultry production to avoid moving.
The Malaysian swine industry has evolved from family-owned farms where production skills were passed down from generation to generation. The present industry demands much higher standards in the safety of pork products, more efficient production methods, and better environmental and marketing systems (Table 10). The government is establishing a permanent swine production area or Pig Farming Areas (PFA) under land reform to ensure the sustainability of pork production from an ecological, economic, disease and social standpoint. This program is scheduled for completion by the end of 2004.
Table 10. Facts and figures of the swine industry in Malaysia.
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Before the onset of the Nipah-Japanese
Encephalitis viral outbreak in 1998, Malaysian swine producers were under pressure from issues related to the environment, health and disease and competitive pricing. After the Nipah virus outbreak, the swine industry in Malaysia was devastated. The swine industry has slowly picked up, but is still not at pre-outbreak levels. Of the 13 states in Malaysia, pig production is only allowed in six. Current production levels are below other swine-producing countries in the region, with 16-18 pigs/sow/year and feed conversion at 2.8-3.0. The most common ingredients used in a typical pig ration are corn, soya, rice bran, wheat bran, wheat pollard, and palm oil. The primary swine genetics used in Malaysia are Landrace, Duroc, and Large White. Duroc is always the terminal boar.
With the introduction of WTO and AFTA, swine producers in Malaysia will face another challenge as the cost of production is much higher than in neighboring countries and is of significantly lower quality. The ability of the Malaysian swine industry to adapt to the challenges of a more liberalized market environment will determine whether it will grow and be competitive or disappear.
Australia's swine industry has massive potential for expansion and freedom from major diseases and is ideally placed as a future force in world pork production and export. With a strong business climate, abundant resources, and a location close to major Asian markets, the Australian government fully supports the expansion of the swine industry with a target on export growth.
Current export of Australian pork is valued at 5.9 million pounds, with Singapore being the primary market. Major disease outbreaks have affected the swine industry in Asia and Western Europe but Australia's freedom from these diseases has created an ideal opportunity.
Average production costs per kilo of live weight is 0.50 pounds, with the most efficient producers having costs below this level. Land costs in Australia are lower than in Europe, and the ability to airfreight fresh-chilled sides of pork to Singapore at a more competitive price than Europe gives Australia a competitive edge in this market. High health status, with freedom from diseases such as FMD, porcine reproductive and respiratory syndrome, swine fever, TGE, and Aujesky's disease enhances swine production efficiency.
The three largest producers in Australia are QAF with 60,000 sows, the Parish Group with 30,000 sows, and the GMH (PIC) group with 15,000 sows. Table 11 shows the distribution of swine farms by state, number of herds, and the number of sows that are located in these states.
Table 11. Distribution of pig farms by state in Australia in June, 2001.
Australian Pig Industry Handbook - PigStats 2000 and 2001
Rapidly changing swine production technology, intensified disease control measures, increased foreign trade activity, and economic and governmental policy changes have combined to cause a marked change in the Mexico swine industry (USDA, 2000). The Mexican swine industry began to change dramatically during the late 1970s with the development of technologically advanced operations that rapidly increased productivity and decreased cost of production. Growing demand and high productivity pushed pork to the lead in the Mexican meat supply, accounting for half of the meat production in Mexico in 1984. Rapid growth in the early 1980s was supported by government subsidies of the cost of sorghum for feed use. The withdrawal of this support in 1984 caused a sharp increase in production costs and coupled to a currency devaluation that decreased consumer buying power, led to a dramatic fall in the demand for pork and sent the swine industry in Mexico into a deep depression that lasted until the 1990s. During this period the pig industry underwent a radical structural readjustment that consolidated part of the industry and increased productivity levels beyond those of the 1980s.
Despite growth through increased productivity in the 1990s, pork production accounts for only 25% of Mexico's meat production. Mexico markets opened to imported hogs, pork products, and poultry products during the 1990s, increasing the competition for domestic pork producers, but the Mexican pork industry was still able to grow at more than 6% per year. In 1998 and 1999, over-production in the US led to extremely low prices, prompting US swine producers to find alternative markets for their products in Mexico. Currently Mexico is the largest foreign market for US live hogs and the second largest market for US pork products (Table 12). Due to these pressures, the Mexican pork industry is experiencing structural change. In the 1990s, 99% of Mexico's 1.9 million hog farms had fewer than 20 animals. These small operations accounted for less than 52% of the country's hogs. Larger operations, which make up only 1% of the hog farms, held the remaining 48% of Mexico's swine. Vertical and horizontal integration operations in Mexico are among the most advanced in the world. The coordination of production from breeding through slaughter ensures a standardized quality of animals. Further vertical integration targets packing plants, which brings the whole processing operation under company or association control and in doing so captures all of the value-added profits. As the Mexican pork industry continues to modernize utilizing advanced technology to increase efficiency of production, they will position their industry as a major exporter in the world pork industry.
Swine production in South America is as varied as the countries that comprise the region. Brazil is by far the largest pork producer in South America, followed by Chile and Argentina. Brazilian pork production has increased each year for the last five years, but at rates that are well below its potential. In 2000 the production was 1.97 million tonnes. The primary reason for this growth is the low production cost compared to other countries (Table 13).
Table 12. Mexico's swine and pig meat situation.
Source: USDA, 2000
*Total supply = beginning inventories + pig crop + imports
Table 13. Overview of the Brazilian pork industry: steady growth.
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Brazilian Pork Meat Industry and Exporter Associates
There are three swine production systems in use in Brazil. The largest system lies in the southern states. These are small farms that rely on the local work force. These farmers have agreements with larger agricultural businesses that furnish feed and technical services. The smaller farmers provide the larger businesses with pigs on a contractual basis. This is a type of integration. In the states of São Paulo and Minas Gerais, the swine operations are medium-sized (150 to 500 sows) integrated operations as well as independent farmers without any type of contract. The third production type is located in the central western region. This is the area where the largest and most modern integrated operations exist. The operations are fairly new as are the packing plants that are associated with these production facilities. The main advantage rests on their nearness to the primary corn and soybeangrowing region of the country. This significantly lowers the cost of feed, which accounts for approximately 60% of the cost of swine production in Brazil. The internal consumption of pork is still comparatively low, at 10 kg per capita. Exports have experienced a tremendous period of growth in the last several years due to the very low cost of production. In 2000 Brazil exported 128,000 tonnes of pork.
Author: JOHN R. MOORE
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