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“While China’s pork imports have begun to slow down, other traditional importing countries have reported significant growth,” says Chenjun Pan, RaboResearch Senior Analyst – Animal Protein. “Looking to the second half of 2017, global pork supply is expected to increase further, and competition for global consumers will intensify.” This potential softening bias on prices contrasts with the stability of the Rabobank Five-Nation Hog Price Index thus far in 2017. In the first five months of 2017, China’s pork imports were flat, which contrasts with the significant growth seen in 1H 2016. The recovery of local production and strong international prices is believed to be responsible for slower imports. In China, pork prices have declined by 30%, from the record levels of last year. As a result, Chinese traders are taking a more cautious approach to imports in 2017.
Rabobank holds the view that China’s pork production will increase by about 2% in 2017. Hog production recovery was faster than expected in 1H, as many producers shared a positive view of the market and made rapid herd replenishments. While the expansion of hog production should continue in 2H 2017, it has been slowed by the price plunge in Q2.
“The emergence of these new trade dynamics will be the most important market development in the second half of this year,” according to Justin Sherrard, RaboResearch Global Strategist – Animal Protein.
Other highlights from the Pork Quarterly Q3 2017 include:
- EU: slower exports due to strong prices
Tight supply and firm demand have maintained upward pressure on prices and starting to challenge exporters. In this context, the recently announced trade pact with Japan, offering tariff reductions, is good news for European exporters.
- US: uncertain outlook on political front and new plant capacity
US pork exports still face uncertainty due to potential trade policy changes and a strong currency, but have been better than expected thus far in 2017. With weaker demand from China offset by stronger demand from Mexico, total exports are expected to increase by about 10%, compared with 2016. Increasing US exports are becoming even more important as production continues to expand.
- Brazil: political turmoil continues to impact
Brazil faces great challenges due to political turmoil, and exports in recent months have declined significantly. However, even with these challenges, Brazil’s pork market is still expected to deliver a positive result, due to lower supply, favourable feed prices, and a favourable exchange rate.
Thursday July 20, 2017/ Rabobank/ The Netherlands.
https://www.rabobank.com
