04 SONZAF Update - Pig meat

Outlook for 2003/04 to 2006/07
Latest situation and outlook
Table 12: Pig meat situation and outlook

Pig meat

Outlook for 2003/04 to 2006/07

Production

Latest situation and outlook

New Zealand's inspected pig meat production is estimated to rise by 6 percent to 51,300 tonnes carcass weight for the year ending September 2004. Over the same period, total pigs slaughtered are expected to rise by 4 percent to 773,000 head.

Based on previous slaughter cycles, the pig kill³ for the three years ending September 2007 is expected to increase, on average, by 2 percent per year. Increases in the breeding herd and higher slaughter weights are both expected to contribute to the forecast increase in production during the outlook.

As at 30th June 2003, the pig breeding herd was provisionally estimated by Statistics New Zealand at 42,100 sows, up 4 percent on the previous year. Fewer farms are producing more pigs. Herds of 1000 and over now account for 72 percent of New Zealand's total pig population (Statistics New Zealand, 2002). More industry consolidation is anticipated during the outlook period, in both the pig farming and processing sector.

Since September 2003, the average weight of pigs killed has, however, been consistently higher than expected. These much higher kill weights may be the result of some farmers holding stock longer to raise the average kill weight in order to offset the lower schedule prices.

MAF has put measures in place for the containment of the recently emerged post-weaning multisystemic wasting syndrome (PMWS). At this point, MAF does not believe it is possible to eradicate the disease. Its affect on production is also not able to be predicted at this time.

Significant changes from SONZAF 2003, and reasons for the changes

The rise in the pig kill for the 2004 season is now expected to be slightly lower than the estimate in SONZAF 2003, reflecting the rapidly changing nature of the pig industry, where further consolidation is taking place. The higher than average kill weights recorded this year have, however, further increased the production estimates for the outlook period.

The number of farms that have been identified as affected with PMWS is currently 24. The Pork Industry Board is now working through the process of developing a regional pest management strategy. MAF is supporting this process with movement restrictions on affected properties and across Cook Strait. MAF is also following traces to other piggeries to determine the extent of spread of the disease.

The New Zealand market, imports, and product prices

Latest situation and outlook

The New Zealand pork industry focuses principally on supplying the domestic market. An increased consumer preference for white meat is the main factor driving the demand for domestic and imported pork in New Zealand. There is also a growing Asian population in New Zealand (projected to grow from 272,000 in 2001 to 400,000 in 2007) that has a strong traditional preference for pork meat.

The New Zealand pork industry is expected to undergo more rationalisation in the medium term, and to improve its productivity as less competitive producers leave the industry. The industry structure is also changing at the farm level: farms are becoming more specialized with breeding, nursing and finishing of pigs taking place on different sites.

Import volumes of pork into New Zealand, for the September 2004 year, are estimated to increase by 11 percent on the previous year, to 29,400 tonnes carcass weight equivalent. Import volumes are projected to increase at a slower pace over the outlook period. This is because the domestic pork industry is expected to increase its supply of pig meat. Another factor is that the consumption of pork in New Zealand is expected to rise but not at a rate that would maintain the same level of growth in imports that has taken place in the last decade. However, by 2007, imports are expected to comprise 38 percent of New Zealand's total pork consumption, compared to 35 percent currently. Australia and Canada are the main suppliers of imported pork.

Significant changes from SONZAF 2003, and reasons for the changes

The general market conditions for pork producers have not changed significantly from those reported in SONZAF 2003.

Schedule prices

Latest situation and outlook

For the year ended September 2004, the weighted average schedule price for pig meat is estimated at $3.17 per kilogram, down 2 percent on the previous year. The pork industry is in the upward phase of its production cycle and the supply of pig meat to the domestic market has increased, albeit at lower schedule prices.

Table 12: Pig meat situation and outlook

September year	Units	2002	2003	2004e	2005f	2006z	2007z
Average schedule price¹	$/kg	3.62	3.30	3.07	3.04	3.01	2.99
Production²	000t	46.3	48.2	51.3	53.1	54.8	56.1
Imports³	000t	22.4	26.4	29.4	31.1	33.0	35.0
Exports³	t	60.4	40.5	49.2	54.1	59.5	65.5
Consumption³	000t	68.6	74.7	80.6	84.2	87.8	91.0

Sources: Statistics New Zealand, New Zealand Pork Industry Board and MAF

¹Average of schedule prices published in Pork Outlook and weighted by pig meat production.²Production on carcass weights.³Imports, exports and consumption in carcass weight equivalents.

Figures may not reconcile due to rounding.

One of the factors expected to influence the price paid to the New Zealand pig farmer over the outlook period, is the projected stronger NZD and its downward effect on the price of imported pork. Lower import prices for pork are expected to further weaken the prices for all grades of pig meat (pork, bacon and choppers) over the next four years. The exchange rate effect is also expected to lower the retail price of beef and sheep meat, further limiting any increase in producers' prices.

Significant changes from SONZAF 2003, and reasons for the changes

There are no significant changes from SONZAF 2003 to report for schedule prices.

³ Inspected slaughter - in this case expressed as net of condemned carcasses.