July 26, 2017

Global pork supply to rise further; trade competition to intensify--report

During the second half of 2017, global pork supply is expected to increase further, and competition for global consumers will intensify, according to the third-quarter pork report of Rabobank.

Rabobank specifically expects China's pork production to increase by 2% this year. Hog production recovery was faster than expected in the first half, as many producers shared a positive view of the market and made rapid herd replenishments. While the expansion of hog production should continue in the second half, it has been slowed by the price plunge in the second quarter.

In the first five months, China's pork imports were flat, which contrasts with the significant growth seen in the first half of 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, according to the agricultural lender's hog report.

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.