Joseph Kerns: Rising protein demand good news for pork industry

Date posted: January 11, 2019

The "Trade, Tariffs and Trepidation" session by Joseph Kerns of Kerns & Associates at the 2019 Banff Pork Seminar was a fast-paced run through soybean and corn production, foreign market imports and exports, and the implication of these to the pork sector.

Kerns outlined the winners and losers in some critical areas:

• Recent ratification of international trade agreements such as CPTPP and CETA: Canada is a partner in these agreements and a winner in this category as the United States is currently without these agreements and is in the midst of a government shutdown.
• Win: Consumers are seeing price benefits when purchasing protein due to a strong supply, especially for chicken. Lose: But China is struggling with a fading GDP, a stock market under considerable duress, auto sales are down and the country is feeling the impact.
• Win: Producers who are winning right now are strong balance sheet managers, and there is some significant restructuring in the industry. Lose: But Kerns said "We are refinancing some entities right now. There is a huge chasm of winners and losers inside our industry, and this includes leveraged land-based operations."

Kerns highlighted what appears to be a continuing upward trend of global GDP numbers well into 2030. He brought those numbers together and forecasts that $38 trillion more in GDP could translate into an increase of a 140 million metric tonnes in meat and poultry consumption between 2017 and 2030, which is an increase of 46 per cent.

This is an unprecedented increase over a relatively short amount of time and as Kerns explained, "This is a rising tide that will float all ships. The sandbox (meat demand) is getting bigger and pork is the dominant protein in the world."

Much of that demand for protein is being driven by emerging economies in the Middle East and Asia but there continues to be small increases in Western economies such as the United States and the U.K. While many focus on the increase in the global population, Kerns says this is a food story. "More food will be consumed in the next 50 years than was consumed in the last 7,000 years."

When looking at changes in consumer demand, Kerns sees another opportunity. "The pork industry is in a fantastic position to enter some of the niche markets and provide specialty products. We can compete in a low cost environment very well."