08 Otoño

January 20120

PPoorrkk sseeccttoorr iinn UUrruugguuaayy

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Index

1. Introduction............................................................................................................... 3

2. Sectorial characteristics ............................................................................................ 3

3. Pork chain in Uruguay ................................................................................................... 4

3.1-Structure ................................................................................................................. 4

3.2- Supply and demand ............................................................................................... 7

4. The global market and commercial opportunities ..................................................... 11

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1. Introduction

The pork chain is one out of a set of 13 value chains selected to be impulsed by the government, for which a series of sectorial policies have been defined in order to strengthen, expand and articulate the productive structure of the country, increasing the added value and the technological content of the Uruguayan production. In particular, its potentials and restrictions were analyzed to increase its production and add value to it, seeking strategic objectives and measures to raise the above mentioned restrictions and exploit its potentials1. This report aims to analyze the recent evolution and the perspectives of the pork sector in Uruguay, as well as analyzing the world market and its projections. To such effects, the report is structured in the following way. The first section presents the main characteristics of the sector in Uruguay; secondly, the structure of the productive chain is examined as well as the supply and demand of the sector taking into account production, consumption, and commercial flow. Finally, the structure of the world market and its main perspectives are briefly commented.

2. Sectorial characteristics

Pork meat is the most consumed in the world: 73 million tons in 2010, equivalent to 43 % of the total consumption of meats.

This meat is outlined for being a great source of proteins. In average, among 18 to 20 grams of protein per 100 grams of product.

In Uruguay there was an increase in the consumption of pork meat in the last years. Although pork meat is the least consumed in our country (10,3% of total meats), in the first semester of 2011 its consumption increased 9% compared to same period of 2010, whereas the consumption of bovine meat, equivalent to 65% of the total consumption of meat, decreased 5,4 % in the same period.

Uruguay imports meat and pork fats for its later elaboration. The raw material which supplies the industry of porcine meat is mostly of foreign origin (61%), mainly from Brazil and Chile, whereas the national production represents 39% of the raw material.

Uruguay does not have any type of sanitary restriction in the production of pork.

Uruguayan trade of pork is basically internal and is commercialized mostly in butcher´s shops and supermarkets.

1 Documents are available on the Ministry of Industry, Energy and Mines, National Directorate of Industries-

http://www.miem.gub.uy/gxpsites/hgxpp001?5,10,529,O,S,0,,

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3. Pork chain in Uruguay

3.1-Structure

The structure of the porcine meat chain is composed by four links:

Primary production

Intermediation

Industrialization

Commercialization

1. Primary production

Within the primary production are the activities of breeding, rearing and fattening. The primary production is held basically by small producers (80%) whereas the medium and big producers have a participation of 18% and 2% respectively. The majority of the producing establishments are located in the south-central area of the country, being the Departments (political division of Uruguay) of major production: Montevideo, Canelones, San Jose, Soriano, Rocha and part of Florida and Lavalleja. Map Nº1 - Pigs (Thousands of heads by Department) - Year 2010

In the last years a change has been registered in the primary production, characterized by the reduction in the number of producers. According to the last porcine survey2, 54% of the establishments surveyed in the census of 2000 abandoned production, remaining only 2.800 establishments. Nevertheless, the existence of pork decreased in minor proportion, determining a major concentration of the production. The number of animals for company changed from 42 in the year 2000 to 70 in 2010. It is important to emphasize that a great percentage of these producers perform farm slaughter, where 50% is sold, 30% is for consumption and 20% is destined to elaborated products.

Source: Digital Map. Uruguay XXI

2 Direction of Agricultural Statistics – Ministry of Agriculture and Fisheries. Year 2006

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2. Intermediation

This link connects the actors of the primary phase to those of the industrial phase, composed by intermediaries and fairs. This latter canal is the most used by small producers who specialize in breeding for later selling their pigs.

3. Industrialization

Includes the activities of slaughter and elaborated products. There exist diverse cuts of meat and products, the first ones are outlined as fresh cuts, backbone (loin), palette, roast and ham and the second ones can qualify in sausages and not sausages. This phase is composed by slaughterhouses, companies that elaborate products, companies that are only dedicated to production - with imported meat or native - and finally companies that sell porcine meat. As for the slaughterhouse, in 2010, the 10 authorized companies, registered slaughtering for a total of 177.104 heads, of which 4 not only slaughter but also elaborate products. More than 80% of the total slaughter is concentrated in the above mentioned companies. In reference to the companies dedicated to the elaboration of products, it is observed that besides the 4 companies previously mentioned, there exist 15 other companies dedicated to this production. It is necessary to emphasize, since it was mentioned previously, that many of these companies use imported raw material. Table 1 shows the slaughterhouses which elaborate products or not. In the first group, appears Mirnabel S.A with 41.7% of the total slaughter, followed by Ardistar S.A (33.7%). On the other hand, Arroyal S.A is the most important slaughterhouse which does not elaborate products with a participation of 10.3%.

Table 1- Authorized slaughterhouses - heads slaughtered in 20103

Slaughter houses Number of pork heads % s/total

Mirnabel S.A (ex Pigusa) 73.848 41,70%

Ardistar S.A (ex cativelli) 59.717 33,70% Arroyal S.A ( Lavalleja – Department Government owned) 18.318 10,30%

Rondatel S.A 13.726 7,80%

Bordenave Motta, Alejo Eduardo 4.723 2,70%

Matadero Los Olivos Soc. Col. 3.412 1,90%

La Tablada SRL 2.071 1,20%

Luchasol S.A 699 0,40%

Matadero Mercedes Ltda 414 0,20%

Intendencia Mpal de Artigas 176 0,10%

Total 177.104 100% Source: National Meat Institute (INAC)

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Only taken into account slaughterhouses that effectively slaughtered in the year 2010, for this motive the slaughterhouse known

as Suc. Carlos Schneck is not listed.

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Next table shows the companies that elaborated products from pork, with its commercial

names.

Table 2- Companies that elaborate products

Name Commercial name

Antic S.A Propios

Asur S.A- Entereza- S.A Granja San José

C. Cristiani & Hnos S.A Tres Hermanos

Elías Gómez Ltda Lito Gómez

Est. J. Sarubbi S.A Sarubbi

Frig. Centenario S.A Centenario

Frig. Picorell S.A Picorell

Frig. Ecocarnes S.A Mossel, La Serrana, La Dolfina

Granja La Familia Ltda La Familia

Kali S.A Kali- La Italiana

Nolyser S.A El Ceibo

Ottonello Hnos S.A Ottonello

Sindon S.A Doña Coca

K y K Colonia Suiza K y K

Tilvenor S.A Productos Porcinos Fenix

Bordenave Motta, Alejo Eduardo

Bordenave

Matadero Los Olivos Soc. Col. --

Mirnabel S.A --

Ardistar S.A --

Source: Ministry of Industry – “Chains of value III”.

4. Commercialization

The national commercialization is made thru different channels, such as butcher's shops and

supermarkets, though in a lesser scale, the direct sale of meat and elaborated products can be

found.

Likewise, to complete the meat chain, it is necessary to incorporate the inputs and the capital

goods, like the food based in grains, forages and by products of the lacteal industry, among

others. The increase of the production of grains in the country has contributed positively to

the development of this chain since 70% of production costs are due to food supply.

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5. Research

In terms of research and development, it´s worth mentioning that Uruguay has, as part of the

Agronomic Faculty, belonging to the National State University, a specialized Unit of Pork

Producer´s which handles the education , research and extension plans as its main objective in

porcine production. In the last years diverse programs and projects of investigation have been

developed in areas linked to technology, genetics, quality of products, sanitary status, among

others.

3.2- Supply and demand

Production

The supply of pork meat showed a recovery in 2010 after the significant fall registered in 2009.

2010 finished with a production of meat of 18.397 tons, which meant an increase of 6.4 % with

regard to 2009. This increase is due to the major stock of porks-5 % in 2010-and to the

consequent increase of slaughter.

Table 3-Stock and slaughter of pig- 2002-

2010 Figure 1- Slaughter of pig-Tons and thousands of

heads

Note (1): Includes farm slaughter Source: Agricultural Statistical Yearbook 2011- Ministry of Agriculture and Fisheries

Year

Stocks (Thousands of heads)

Slaughter1

Thousands of heads

(tons of meat)

2002 255 266 19.565

2003 225 230 16.788

2004 235 261 17.424

2005 255 281 19.754

2006 240 277 20.383

2007 245 297 21.057

2008 235 278 20.869

2009 200 237 17.290

2010 210 250 18.397

0

50

100

150

200

250

300

350

0

5.000

10.000

15.000

20.000

25.000

2002 2003 2004 2005 2006 2007 2008 2009 2010

Thousands of heads Tons

Tons Thousands of heads

Source: Uruguay XXI based on data from Agricultural Statistical Yearbook 2011- Ministry of Agriculture and Fisheries.

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Internal Consumption

Uruguay has a meat consumption structure that differs from the rest of the world. While in our country, bovine meat is the most consumed (65%) and pork is in third place (with a participation of 10%), in the rest of the world pork meat leads the consumption of meat with a share of 43% in total.

Figure 2- Structure of the consumption of meats in the world and in Uruguay - Year 2010

6% 5%

43%

10%

27%

20%

24%

65%

-20%

10%

40%

70%

100%

World

Bovine

Poultry

Suine

Ovine

Uruguay

Source: Uruguay XXI based on data from FAO e INAC

However, in recent years there´s been a change in the habit of meat consumption in Uruguay,

increasing consumer preference for pork meat. In 2003, pork consumption per capita stood at

8.3 kilos, while in 2010 this consumption reached nearly 10.7 kilos per capita, determining that

the growth of pork consumption in 2010 was the largest of all meats (13 %).

Of continuing this behavior, it is estimated that in 2011 the consumption will reach 11 kilos per

capita. This growth is due to the even greater participation in the share of consumption of

fresh meat, combined with a major presence in places of commercialization such as

supermarkets and butcher´s shops.

Table 4- Evolution of the consumption of meats in Uruguay - kg per capita

2006 2007 2008 2009 2010

Bovine meat 51,2 51 54,7 58,2 61,2

Poultry 17,7 14,7 17 19,0 19,0

Suine meat 9,0 9,6 8,6 8,6 9,7

Ovine meat 6,2 6,2 5,7 5,8 4,5

Source: INAC

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Figure 3- Variation of the consumption of meats in Uruguay - % Var Kg per capita

8%13%

2%

38%

5%0%

13%

-22%-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Bovine meat Poultry Suine meat Ovine meat

Variation % (2006/2005) Variation % (2010/2009)

Source: Uruguay XXI based on data from INAC

Exports and imports

Foreign trade of the sector presents a deficit due to the characteristic from which Uruguay imports a high volume of pork meat that is used for domestic output. On the export side, these are very limited on both, porcine meat and elaborated products, which reflects that the industrial production takes the internal market as a destination. The imports, on the opposite side, reach a considerable value (US$ 43 million in 2010), of which 86% are imports of pork.

Porcine Meat

Regarding exports of pork there was a significant decrease in the period 2006-2010, being the

Russian Federation the only destination in 2006 and exports in 2010 reached only 4 tons. It is

necessary to emphasize that last year´s exports correspond only to Rondatel S.A. and its sole

country of destination was Equatorial Guinea, country that registers purchases in every year of

the period. On the other hand, in 2011 there were not registered exports of this item.

Import values registered an upward trend in the period 2006-2010, presenting an average

annual growth rate of 28%. It should be noted that imports in 2011, overcame the registered

ones in the closed year 2010 - both in value and in volume. Brazil is the principal importer,

representing 88% of the total of the volume imported, followed by Chile (5 %) and

Denmark (4 %).

The main importers are Centenario SA (19%), Sindon SA (18%), Wilisol (12%) and Carlos Shneck

(9%) together representing 58 % of total tons imported in 2011.

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Table 5-Export and import of porcine meat –US$ and Tons

Source: Uruguay XXI based on data from National Customs Administration

Pork products

The exports of products derived from the porcine industry are very scanty and consist of the

following products: prosciutto, hams and shoulders.

As shown in the table below, excluding the exports of raw ham – which were continued from

2006- the other products were exported in punctual years. The exports of raw ham correspond

to a sole company, ÑANDUGUAY S.R.L., whose destination is Brazil. Other products were

destined to Brazil and United States.

Table 6-Export of pork products- Data in US$ and Tons

Source: Uruguay XXI based on data from National Customs Administration

Regarding the imports, it is highlighted the high value of imports of pork fat. This product is used as raw material in the processing industries. In 2010, the imports of fat contributed in more than half of the value of derivate products, reaching US$ 3,6 millions. The first origin of these imports is Chile, representing 50% of total imports, followed by Denmark (23%). Other products of the processing industries imported by Uruguay are “Shoulders and cut thereof of swine” and “ham”, which together represent 16% of the total amount of imports. Likewise meat, Brazil is the main origin of these imports, being SADIA the company responsible.

Year Export Import

US$ Tons US$ Tons

2006 1.171.360 652 13.941.975 7.796

2007 590.812 378 18.195.750 10.079

2008 21.234 6 25.469.383 9.451

2009 31.122 8 25.311.013 11.278

2010 17.887 4 37.524.740 13.340

2011 0 0 51.392.550 17.093

Products 2008 2009 2010 2011

US$ Kilos US$ Kilos US$ Kilos US$ Kilos

Raw ham 3.360 200 7.650 500 6.360 400 6.360 400

Others Hams 0 0 0 0 0 0 0 0

Shoulders and cut thereof of

swine 0 0 25.197 3.600 0 0 0 0

Total 3.360 200 32.847 4.100 6.360 400 6.360 400

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Table 7- Imports of the processing industries and derivates - Data in US$ and Tons

2008 2009 2010 2011

US$ miles Ton US$ miles Ton US$ miles Ton US$ miles Ton

Pork Fats 3.635 2.928 3.061 3.134 3.633 5.872 4.078 3.413

Shoulders and cut thereof 854 464 692 436 936 552 1.192 535

Raw ham 807 96 884 114 990 122 1.343 131

Hams and cuts thereof 751 291 771 315 717 296 1185 391

Total 6.048 3.780 5.408 3.999 6.276 6.841 7.798 4.470

Source: Uruguay XXI based on data from National Customs Administration

Investment

Since 2007, with the approval of Decree Nº 455, which regulates Chapter III of the Law of the Promotion and Protection of Investments (Law Nº 16.906), there have been approved a wide range of sector projects, totaling US$ 3.07 million. These investments are mainly concentrated in the industrialization and sale of pork products.

4. The global market and commercial opportunities

World production of pork meat totalized a volume of 102.7 million tons in 2010 and is

expected to reach a record level by 2012. This growth is due mainly to the recovery of South

Korea and China. China is the largest producer, accounting for 50% of the total

volume followed by the European Union (22%) and Brazil (3%).

In terms of consumption, during the past 11 years, world consumption grew steadily except

for 2007, the year in which it fell 1.4% due to the fall in the demand of China by

7.4%. Consumption in 2010 totalized 102.5 million tons of meat, a slight increase is

estimated for 2012. Again, the main consumers are China, European Union, Brazil and it should

be added the United States which ranks as the third largest consumer of pork.

In the region, consumption is also increasing, with Brazil and Mexico the largest consumers,

followed by Chile and Argentina.

Figure 4 - Major consumers of pork - Year 2010

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China50%

EU20%

USA8%

Brazik3%

Russian Federation

3%Japan

2%

Vietnam2%

Mexico2% Others

10%

Source: Uruguay XXI based on data from USDA-FAS

While pork is the most produced meat in the world, exceeding production of poultry meat (77 million tons) and beef (57 million tons), it is not the most widely traded. In 2010 the tonnage exported was 6 million and the tonnage imported was 5,8 million, implying that only 6% of the production was traded. Regarding exports, the United States is the largest exporter followed by the European Union, Canada and Brazil. It is estimated that by 2012, United States exports will rise and European Union exports will decline, reaching a volume of 2.3 million and 1.9 million tons respectively. Regarding imports, the major importers are Japan (19.3%), Russian Federation (14.8%), Mexico (10.1%) and South Korea (10%).

Figure 5 – Main importers of pork meat - Data in millions of tons

1,2

0,9

0,60,6

0,6

0,40,4

0,2 0,2

1,2

0,70,7

0,6 0,50,4

0,40,2 0,2

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

Millons of Tons

2011* 2012*

Source: Uruguay XXI based on data from USDA-FAS. Note (*): forecasted figures.

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Global Perspectives4

For 2014 it is expected a moderate growth, consumption, production and world trade in meat, resulting in a dynamic market. According to FAO's strong economic growth in developing countries in conjunction with consumer preference for foods with higher protein content will lead to increased consumption of meat. This growth will be driven by increased production of pork and

poultry in developing countries.

4 Source: agricultural perspectives, OCDE-FAO, 2005-2014, http://www.fao.org/docrep/008/y9492s/y9492s00.htm

Global consumption of meat, 1996-2014 Millions of Tons

0

20

40

60

80

100

120

140

160

180

200

Bovine meat Pork Poultry Ovine meat

Source: FAO