April 20, 2015

Pork prices decline due to weak demand in Q1-Rabobank report

The global pork industry has been searching for stability during the first quarter, with strong supply growth and relatively weak demand driving the market, the latest Rabobank Pork Quarterly report said.

It said pork prices are sharply lower, as robust global supply growth (driven by the US, Russia and Brazil) has outpaced rather subdued demand, dragging producer profitability into negative territory.

"The increasing competition in the global export market will result in continuous price and margin pressure in most countries around the globe. Therefore, after the buoyant-at least price-wise-last couple of years, the global pork industry is slowly moving towards the bottom of the cycle," Rabobank animal protein analyst Albert Vernooij said.

Based on the report, here's an outlook for global and regional markets:

In the US, as supply recovers after Porcine Epidemic Diarrhea virus (PEDv) the question is as to what degree recovery will be coupled with the strengthening US dollar and lower prices.

In the EU, prices will follow seasonal developments, but will remain lower than the historical average and below break-even level.

With the industry slowly improving, prices bottomed out in China in March.

Brazilian prospects remain positive, but less buoyant than in the first quarter, driven by pressured domestic consumption and difficult Russian export negotiations.