South African pork producers do not produce enough pork ribs to meet the local demand, hence the shortfall needs to be filled mainly by rib imports, mainly from Germany. This makes South Africa a net importer of pork on the global market.
There are about 4 000 commercial pig farmers and 19 stud breeders in South Africa. In 2016, the domestic pig population was estimated at 1.512 million head, a decline of 0.7% y/y. Domestic pig numbers have been trending lower over the last decade, however, the number of pigs slaughtered and pork production have been on the increase over the same period. This is an indication of increasing efficiency within the pork industry. In 2016, the number of pigs slaughtered was approximately 3 million head, an increase of 3% y/y. High feed prices as a result of drought forced many pig producers to destock in 2016.
In 2018, South Africa is forecast to account for only about 0.23% (260 000 tons) of global pork production and is therefore regarded as a small pork producer by global standards. South African pork production increased at an average growth rate just shy of 4% per annum since 2012, driven mainly by increased consumer demand. However, the number of pigs slaughtered increased by an average annual growth rate of 3% over the same period, implying that South Africa is slaughtering heavier pigs.
2018, pork production is projected at 260 000 tons, up by 4% y/y on a forecast favourable 2017/18 summer crop season, which should keep feed prices low. Pork consumption is forecasted at 280 000 tons, up by 3% y/y. Pork is a cheaper red meat option for constrained consumers. South Africa is expected to remain a net pork importer for the foreseeable future. Imports are forecast at 36 000 tons, down by 3% y/y from higher domestic production.
Global supply and demand of pork
South Africa is a relatively small player in terms of global pork production and consumption. In 2018, domestic pork production is forecast to amount to 260 000 tons, an increase of 4% y/y. This constitutes only 0.2% of global pork production. On the other hand, total pork consumption is forecast at 280 000 tons, of this, 36 000 tons will come from imports. South African pork producers do not produce enough pork ribs to meet the local demand, hence the shortfall is filled mainly by rib imports from Europe, mainly from Germany. This makes South Africa a net importer of pork on the global market.
Due to the improving profit margins and growing demand for pork, the national pig herd is expected to grow once again in South Africa. Pork producers are expected to use these opportune times to repay debt and upgrade their systems, which bodes well for the future of the industry.
Domestic demand for pork has been growing over the last decade, and it is expected to continue to do so over the next decade. The long-term prices of pork (Table 2) are forecast to remain stable, which should minimise fluctuations in consumer demand and disruption for farmers. Pork continues to be a cheaper red meat option, which appeals to the economically constrained consumer. However, if disposable incomes do improve under the new political dispensation, the pork industry could lose some of its customer base to substitute red meats such as beef.
To improve sow performance, farmers must identify where there is greatest potential for improvement on their unit by comparing their performance with industry data. Farmers must set themselves achievable targets and then determine the most cost-effective ways to achieve these targets.
Detailed financial data for the piggery unit will enable farmers to go one stage further in prioritising between alternative management changes, with a ‘what if’ assessment enabling them to assess the financial benefits of improving performance on their units.
On-going recording of sow performance will tell farmers how successful the measures they are taking are and this also provides encouragement to the farmer and his/her team to do more of the same.
As at mid-2017, the domestic pork industry had a share of 2.2% of the total value of South Africa’s agriculture (in real terms), and it was growing at an average rate of 4.9% per annum over the previous five years. The Bank’s exposure to piggeries at around the same time was approximately 2.5% of its total agricultural book value, which is a good reflection of the industry’s relative size within the agriculture sector. However, the Bank needs to continually manage he growth of its risk appetite, to ensure that its exposure is generally in line with the industry’s average growth rate.