RaboResearch: Global POrk Quartely Q4 2022: Producers Cautious as Global Uncertainties Rise

Demand uncertainties rise as consumers face mounting pressures. With inflation outpacing wage growth, lower real wages are expected to negatively impact protein consumption in Q4 2022 and 1H 2023.

Value-conscious consumers are already seeking out lower-value cuts, trading down from branded to private label alternatives at retail, and limiting foodservice purchases, adding further weakness to premium product markets. Holiday sales will test the market’s resilience and its ability to absorb premiums. Lower GDP growth expectations in 2023 will limit market needs, slow herd-rebuilding efforts, and impact trade volumes in Q4 2022 and early 2023.

After disappointing harvests in the US, parts of Europe, and Asia, grain and oilseed inventories are near record lows and prices at historical highs. The acreage of corn and soybeans being planted in the Southern Hemisphere could help ease, but not eliminate, the strain in 2023. Logistics are presenting additional challenges to the market.

Competition for reduced grain and oilseed inventories and the resulting price increases are compounding challenges producers face from labor and energy costs. Historically high global production costs are limiting herd expansion in most regions. With few prospects for cost relief and limited visibility around the strength of consumer demand given the challenging economic environment in 2023, producers have scaled back plans to add to their herds.