October 17, 2014


Global pork market to cool down in 4th quarter--Rabobank

The global pork market is expected to cool down in the fourth quarter this year with the disappearance of the "buoyant market circumstances" that prevailed in the first three quarters, agricultural lender Rabobank said in its fourth and last Pork Quarterly Report for 2014.


The report, released Friday, said the Russian trade ban will continue to weigh on the market, particularly the European Union (EU), which saw a 9% drop in the prices of pork. For the remainder of the year, prices will remain under pressure because of the high stocks in the main export destinations Japan and South Korea, the report added.


It said the EU pork market is also hobbled by weak consumer demand. There were indications production in the 4th quarter will increase by 1.5%. "Only a clear drop of retail pork prices, improving consumption and a further decline of the value of the euro might limit the price decline," the report stated.


In the US, the report noted that the effects of the 2014 porcine epidemic diarrhoea virus (PEDv) outbreaks were tempered by higher slaughter weights. It said PEDv-related losses "drove hog futures to all-time highs in July and would keep prices and margins well above year-ago levels" in the remaining months of the year. It said the futures curve indicated margins of US$52/per head in the fourth quarter.


The report said that PEDv-induced drop in pork production and much lower beef production kept prices high. Because lower beef production resulted in higher beef prices, consumers traded down to pork, according the Rabobank report.


So far, the report said, all indications point to increased US pork production in 2015. However, they are tempered by the possible return of PEDv this winter, as it is believed the virus thrives in colder and wetter conditions.


While the Russian import ban has severely impacted the EU pork industry, it proved quite beneficial for Brazil, where prices, the report said, surged 30% per kilogramme between June and August. The report noted that Brazil became Russia's last resort as source of pork.


"Brazilian prices will continue to rise due to slight growth in production and seasonally increasing domestic consumption," Rabobank predicted.


In the case of China, the Rabobank report affirmed the forecast recovery of the pork market in the coming months leading to the seasonal demand peak.


It added that during the time lag between the growth of the sow herd and pork production, import growth would be strong.