Outline of Industry Report: Pork / Pig Meat

I. Industry Background
Pork Industry- The pork industry is all about all forms of pig meat, including fresh and
processed meat. In point of fact, 78% percent of all pork consumed in the world has
been processed in some way, that sometimes is being turned into commodities such as
sausage, bacon and other popular products; 22% remains fresh.

There are characteristics of perfect competition that can consider the pork industry as a perfect
competition.
Firms are said to be in perfect competition when the following conditions occur: (1) many firms
produce pork; (2) many buyers are available to buy and many sellers are available to sell pork
(3) Homogeneous (4) sellers and buyers have all relevant information to make rational decisions
about pork being bought and sold

Top Producers of Pork Meat year 2020: China produced 34 million metric tons of
Pork.

Top Consumer of Pork Meat year 2020: China consumed 40.3 million metric tons of
pork in 2020.

Top Importers of Pork Meat Year 2020: China, 3.70 million metric tons

Top Exporters of Pork Meat Year 2020: US 3.9 million metric tons

The Philippines is the world’s tenth-largest consumer, eighth-top producer and seventh-largest
importer of pork. Pinoys love to pig-out, gobbling up about 35 kilogrammes of meat yearly,
including an average of 15 kilogrammes of pork.

It’s no surprise that the local swine industry is one of its most lucrative trades, worth PHP200
billion or USD5 billion and contributing 18.28 percent to the country’s agricultural output in 2015,
ranking second only to rice and staying way ahead of poultry. (Yan, 2020)

II. Market Analysis (S&D)

SLIDE: Projected Market Value

According to the report, the Global Pork Market is expected to be valued at US$ 191.2
billion by 2026.
SLIDE: Growth and Dilemmas

The growth of the pork meat market can be attributed to changes in the food
consumption pattern of people all around the world. The expansion of retail
market and easy availability of the product through various sales channel make it
convenient for consumers to purchase packaged pork meat, which drive the sales
figures. However, rise in the adoption of veganism and stringent law implemented
against animal cruelty act as the major restraints of the global pork meat market.
On the contrary, increase in popularity for organic pork meat and clean label
products is expect to offer lucrative opportunities for the expansion and the
global pork meat market growth.

The growth of the pork meat market can be attributed to:

● Changes in the food consumption pattern of people all around the world;
● The adoption of veganism and stringent law implemented against animal cruelty
act as the major restraints of the global pork meat market.
● The rise of plant based meat also poses a threat not only to pork, but the whole
meat industry as well.

The expansion of the retail market and easy availability of the product through various
sales channels make it convenient for consumers to purchase packaged pork meat,
which drives the sales figures

SLIDE: Market Segment

Key Market Segments

By Type

● Chilled (packaged under modified or controlled atmospheres to preserve the

product against microbial deterioration and spoilage and also to control food-
borne pathogens. Perhaps this is better considered as slowing microbial
metabolism and growth.)

Example:
 ● Frozen (The meat, which is in peak condition and freshness, is preserved by
rapid freezing it stops bacterial growth. Freezing meat can therefore preserve the
meat in good condition and retain its wholesomeness and quality for long periods
ranging from 6 months to a year depending on the kinds of meat).

SLIDE:

By Packaging

● Store Wrap
● Modified Atmosphere Packaging (Modified atmosphere packaging (MAP) is a
packaging system that involves changing the gaseous atmosphere surrounding a
food product inside a pack, and employing packaging materials and formats with
an appropriate level of gas barrier to maintain the changed atmosphere at an
acceptable level for preservation of the food).

● Vacuum Packaging (Vacuum packing is a method of packaging that

removes air from the package prior to sealing. This method involves
(manually or automatically) placing items in a plastic film package,
removing air from inside and sealing the package)
● Shrink Bags (Shrink bag, also shrink film or wrap, is a material made up of
polymer plastic film. When heat is applied, it shrinks tightly over whatever it is
covering. Heat can be applied with a handheld heat gun (electric or gas), or the
product and film can pass through a heat tunnel on a conveyor.)

● Chubed (A chub or a chub pack is a type of container formed by a tube of

flexible packaging material. The cylindrical package has the appearance of a
sausage with the ends sealed by metal crimps or clips.)
 ● Canned (the act, process, or business of preserving cooked food by sealing
them in airtight containers such as cans)

SLIDE:

By Application

● Household (for personal use or consumption)

 ● Commercial (any activity in which you use a product or service for financial
gain, profiteering).

SLIDE:

Global Pork Producing Countries

● China
 ● European Union

● United States

● Brazil

● Russia

● Vietnam

● Canada

● Mexico

● Philippines

● South Korea

● Other

Global Pork Consuming Countries

● China

● European Union

● United States

● Brazil

● Russia

● Japan

● Vietnam

● Mexico

● Philippines

● South Korea

Global Pork Importing Countries

● China

● Mexico

● United States

● Hong Kong
 ● Japan

● Australia

● Canada

● Colombia

● South Korea

● Philippines

Global Pork Exporting Countries

● European Union

● United States

● Canada

● Brazil

● Chile

● Mexico

● China

● Russia

● Australia

● Serbia

SLIDE: How the price of pork is established

Prices for hogs, as for other commodities traded in competitive markets, result from the
interaction of supply and demand. But a long list of factors affects supply and another
long list affects demand.

● individual firms do not have any influence on the market price

● Price Takers

Price is determined by the intersection of market demand and market supply; individual
firms do not have any influence on the market price in perfect competition. Once the
market price has been determined by market supply and demand forces, individual firms
become price takers. Individual firms are forced to charge the equilibrium price of the
market or consumers will purchase the product from the numerous other firms in the
market charging a lower price (keep in mind the key conditions of perfect competition).

SLIDE: Graph

● D1 + S1 = Point A (Initial Equilibrium)

● D1 + S2 = Point B/ same demand and increase in supply (lower price but higher
quantity demanded)
● D2 + S1 = Point C Increase in price same quantity demand as point B (higher price
but same quantity demanded as point B)
● D2 + S2 = Point D Increase in demand and increase in supply will rever back to
original price (point A) and increase in quantity demanded

● Note: Pork is an elastic good which means that when the price goes up,
consumers' buying habits change, and when the price goes down, consumers'
buying habits also change.
● In a perfectly competitive market the market demand curve is a downward
sloping line, reflecting the fact that as the price of an ordinary good increases,
the quantity demanded of that good decreases. Price is determined by the
intersection of market demand and market supply; individual firms do not have
any influence on the market price in perfect competition. Once the market
price has been determined by market supply and demand forces, individual
firms become price takers. Individual firms are forced to charge the
equilibrium price of the market or consumers will purchase the product from
the numerous other firms in the market charging a lower price (keep in mind
the key conditions of perfect competition).
● A strategy often used to increase market share is to offer a firm’s product at a
lower price than the competitors. In a perfectly competitive market, firms
cannot decrease their product price without making a negative profit. Instead,
assuming that the firm is a profit-maximizer, it will sell its goods at the market
price.
● Lastly, in a pure competitive market, the firms are only pice takers and not
price makers.

Price takers accept the ruling market price and sell each unit at the same price.

Price makers have some pricing power

SLIDE: Types of Price Changes

Types of Price Changes

● Trends.

● Seasonality (Certain events that influence the supply and demand. Example, new
year, christmas, lent, chinese new year)
● Cycles (hog cycles are cycles of over- and underproduction of goods because of
time lags in the production process. Such cycles often occur with agricultural
products such as pork where high prices one year cause pig farmers to breed
extra pigs, leading to oversupply and low prices in the following years)

● Day-to-day changes (Changes in the price due to the supply and demand of the
product)
 SLIDE: Philippine Hog Industry Matrix

III. Production or Service delivery (cost, revenue, profit)

 Cost of production

- The production costs of pig meat in 2016 for European countries such as Great
Britain, Austria, Belgium, Brazil (Brazil submit data for two regions: Mato Grosso
(MT) and Santa Catarina (SC)), Canada, Czech Republic, Denmark, Finland,
France, Germany, Hungary, Ireland, Italy, Netherlands, Spain, Sweden, and USA
are shown below in Figure 1.

o This data includes all variable costs (other than transport of pigs to abattoirs
(slaughter house) and fixed costs.

o Fixed costs include depreciation and interest costs for capital items such as
buildings and equipment.

o Costs for regular and casual labour are included but no allowances are made
for directors’ salaries or partners’ drawings. (Davis, n.d.)

- The total hog production from October to December 2020 was estimated at 515.05
thousand metric tons, liveweight. This was -13.8 percent lower compared with the
previous year’s same quarter output of 597.51 thousand metric tons, liveweight.
- Among the regions, CALABARZON was the top producer of hogs during the quarter
with 82.02 thousand metric tons, liveweight. This was followed by Northern Mindanao
with 58.02 thousand metric tons, live weight and Central Visayas with 52.86 thousand
metric tons, liveweight. These regions shared 37.5 percent to the country’s total hog
production.
 - Relative to their levels in the same quarter of 2019, 11 regions reported decrements in
production during the period, with Central Luzon exhibiting the highest annual decline of
-49.1 percent. This region reported a production of 49.46 thousand metric tons,
liveweight this quarter, from 97.22 thousand metric tons, liveweight in the fourth quarter
of 2019.
- As of 01 January 2021, the total swine inventory was estimated at 9.72 million
heads. This was a decline of -24.1 percent from the previous year’s same period level of
12.80 million heads. Population in backyard and commercial farms contracted by -13.3
percent and -41.8 percent, respectively. Of the total swine population, 71.1 percent were
raised in backyard farms while the remaining 28.9 percent were from commercial farms.
(Figure 2 and Table 2)
- Similarly, inventory by age group recorded decreases during the quarter compared with
the previous year’s same period level, with grower exhibiting the biggest reduction of
-28.9 percent.

Profit indicators in a piggery

In the pork industry, the 2 main indicators of net returns to help forecast financial outcomes
which are:

1. The margin over feed cost

Feed represents about 65% of overall costs in pig farming, so for small businesses the
margin between revenue and feed cost is a fair measure of performance. This is called the
margin over feed cost (MOFC).
The MOFC is obtained by deducting the cost of feed to produce 1kg of hot standard carcase
weight (HSCW) pork from the average pig price. A higher MOFC indicates a higher profit
margin. This figure can vary greatly due to fluctuating feed prices. (so take care when
forecasting.)

2. Cost of production or operating costs

Cost of production includes all the costs of producing 1kg of dead weight. Some businesses and
benchmarking groups record all the costs of producing 1kg of dead weight except for interest on
capital and depreciation.
You can calculate the profit or operating margin by deducting the cost of production or the
operating cost from the average price you received (per kg dead weight) for all pigs leaving the
property.

The pig profit cycle

Pork production operates in a volatile economic climate with feed costs influenced by grain
supply, and pork price responding to supply and demand. The pig-meat price to feed-price ratio
illustrates the volatility of pork production.
The price of pig meat, in cents/kg of HSCW, is divided by the price of feed, in cents/kg, to find
the ratio. A higher ratio than the long-term average generally indicates a profitable industry.
IV. Effects of Economic Crisis

RECESSION, GOVERNMENT INTERDICTION AND AFRICAN SWINE FEVER

DURING THE PANDEMIC

· Executive Order 124 s.2021, IMPOSITION OF MANDATED PRICE CEILING ON

SELECTED PORK AND CHICKEN PRODUCTS IN THE NATIONAL CAPITAL REGION

- imposed 60-day price ceilings or caps

- aims to slash a third of pork prices
- “imperative and urgent to ensure that basic necessities are adequate, affordable,
and accessible to all.” Yet the exact opposite happened.
- first few days of the price ceilings’ implementation, pork essentially evaporated
across Metro Manila’s wet markets
- In January 2021, the country’s overall inflation rate (which measures how fast
prices are rising) shot up to 4.2% in the middle of a pandemic and a recession.
- fresh pork prices rose to 68-77%
- Suppliers would rather deliver pork at places outside Metro Manila
- Gap between consumer’s willingness to buy and producers’ unwillingness to sell
invariably leads to a pork shortage.
- estimated shortage in 2020-February 2021 totaled 516,000metric tons
- ASF wiped out as much as 36% of our pigs and counting
- producers are hard put to lower their prices
- price ceilings made pork cheap but largely absent

LIST OF REFERENCES:

African swine fever: OIE - World Organisation for Animal Health. (n.d.). OIE. Retrieved
March 21, 2020 from
https://www.oie.int/en/animal-health-in-the-world/animal-diseases/african-swine-fever/

Boundless Economics. (n.d.). Lumen. Retrieved March 21, 2020 from

https://courses.lumenlearning.com/boundless-economics/chapter/perfect-
competition/#:~:text=Price%20is%20determined%20by%20the%20intersection%20of
%20market%20demand%20and,individual%20firms%20become%20price%20takers

Davis, C. (n.d.). 2016 pig cost of production in selected countries. Retrieved March 18,
2021, from https://projectblue.blob.core.windows.net/media/Default/Pork/2016-pig-cost-of-
production-in-selected-countries.pdf
Global Pork Market Forecast (2018 to 2026) - By Production, Consumption, Import, Export
& Company. (2020, May 21). GlobeNewswire News Room. Retrieved March 21, 2020
from
https://www.globenewswire.com/news-release/2020/05/12/2031727/0/en/Global-Pork-
Market-Forecast-2018-to-2026-By-Production-Consumption-Import-Export-Company.html

How and Where is Price Established?. (2015, September 15). Pork Information Gateway.
Retrieved March 21, 2020 from
https://porkgateway.org/resource/how-and-where-is-price-established/

How to forecast profits and expenses in your piggery. (2020, August 06). Retrieved March
19, 2021, from https://www.business.qld.gov.au/industries/farms-fishing-
forestry/agriculture/livestock/pigs/improving-piggery-business/forecast-profits-expenses

Pork Meat Market Size, Share & Trends: Analysis Forecast, 2021-2027. (n.d.).
Allied Market Research. Retrieved March 21, 2020 from
https://www.alliedmarketresearch.com/pork-meat-market

SWINE SITUATION REPORT October to December 2020. (2021, February 8). Retrieved
March 21, 2021, from https://psa.gov.ph/sites/default/files/8_%5BONSrev-cleared%5D
%20SR_Q4%202020%20Swine%20Situation%20Report_signed.pdf

Yan, G. (2020, January 3). Pork remains the favourite in the Philippines. Retrieved March
19, 2021, from https://www.thepigsite.com/articles/pork-remains-the-favourite-in-the-
philippines