October 21, 2016

Rabobank's global pork report for Q4: US supply glut dampens global outlook


Abundant supply and looming slaughter capacity constraints in the US are pressuring global pork prices, a situation exacerbated by slowing Chinese imports, according to the Rabobank Global Pork Quarterly Q4 2016 report.


This will result in a further decline of the Rabobank Five-Nation Hog Price Index in Q4, which turned unexpectedly in Q3," says Albert Vernooij, animal protein analyst at Rabobank. "Prospects for 2017 are weak, with global trade expected to stabilise and all main producers in expansion mode, making supply discipline key to the outlook."


China: Prices to rebound until Chinese New Year


Low production and seasonal demand towards the Chinese New Year will support prices after the Q3 dip. This will support ongoing strong import volumes, but growth will be slower than previous months. Competition will intensify as more countries and companies obtain export permits.


EU: Supply discipline key for positive prospects


Continuing pressured supply and good export demand will result in, at least, prices stabilising at elevated levels during Q4. However, 2017 prospects are soft, with rising competition in Asia and the declining British pound pressuring returns from this important local market. Herd expansion needs to stop or decline to support prices.


US: Supply glut to result in strong price pressure


Higher-than-expected supply, combined with stalling exports and rising domestic competition from beef and poultry, is pushing hog prices and industry profitability down. For hog producers, this situation will worsen in Q4, with slaughter capacity constraints putting processors in the driving seat until new capacity arrives in 2017.


Brazil: Market recovery around the corner


Balanced supply, coupled with rising exports, will result in pork prices rebounding during Q4. Combined with the expected decline in feed costs, this will support production and exports in 2017.


- Rabobank

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