July 21, 2015

China pork production under pressure - Rabobank report

The US and the EU may benefit from the continuing decline of sow and hog herds in China, the latest Rabobank pork quarterly report said.

The third-quarter report noted that the declining sow and hog herds in the world's second-largest economy were pressuring supply, even as piglet and hog prices surged toward the end of the first half of the year.

"The enormous cull of China's herd over the last 18 months is pressuring production, pushing prices up and industry margins into the black", the agricultural lender said.

The report said the global pork market "will further improve in Q3 (third quarter), supported by the sharp decline of the Chinese sow and hog herds", the report said.

The US, which has the largest volume of pork among the exporting countries, could be the most likely supplier for China, although Rabobank said it (the US) "also has the most challenging competitive position due to the high value of the US dollar and the limited availability of ractopamine-free pork, as demanded by China". Ractopamine is a feed additive that promotes leanness in animals raised for their meat.

The report said the EU is the second-most likely supplier for meeting the increasing demand from China and added that Canada and Brazil "will likely fill part of the extra demand from China, but have limited extra volume available for export".

Availability of pork in the third quarter might be an issue as rising competition for pork among importing countries (especially South Korea and Mexico which continue to be suffer from outbreaks of PEDv and foot-and-mouth disease, respectively) would result in rising prices, according to the report. "Next to the possible lower import availability in these [importing] countries (which is further challenged by the strengthening of their respective currencies), domestic pork production will remain under pressure in Q3", the report stated. --Rick Alberto (rickalberto@efeedlink.com)