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Rabobank: China’s Festival Season Drives Elevated Pork Market

22 October 2013
Rabobank

GLOBAL - The global pork industry has experienced a positive Q3, according to Rabobank’s Q4 Pork Quarterly. In line with expectations, the Rabobank five-nation hog price index continued its upward trend, resulting in a peak of 162 per cent in August, just below the last peak of 165 per cent in August 2008.

The index declined at the end of Q3 due to the recovery of supply after the summer heat. However, global pork prices are forecast to remain elevated for the remainder of the year, supported by demand resulting from start of the Chinese festival season.

Compared with Q2 2013, pork prices in Q3 2013 showed double digit increases in almost all major producing regions. The main drivers were tighter-than-expected supply in the US, due in part to the impact of the porcine epidemic diarrhea virus (PEDV), and the EU, due to the impact of the EU’s introduction of group housing of sows in January 2013, and continuing robust import demand.

For the remainder of the year, global pork prices are forecast to remain elevated. The limited increase of the sow herd in almost all regions shows that farmers are cautious to expand production. Despite the positive prospects with regard to the feed prices, farmers first want to regain part of the lost margins of the last few years before expanding production.

Into 2014, declining feed costs will continue to support slow herd rebuilding. Combined with productivity increases, this will result in higher supply and, likely, lower prices. However, the price slide will be slow due to the limited growth of sow numbers, the continuing demand growth in Asia and still relatively high feed costs, which will curb supply growth at least until mid-2014.

The approval of Shuanghui’s acquisition of the largest global pork company, Smithfield, has been yet another sign of China’s growing dominance in the global pork industry. The country’s import demand has been exerting more and more influence on prices in different regions throughout the world in the last few years. The acquisition is but one illustration of China’s ongoing search for sufficient pork supply to feed their growing and wealthier population, a situation which will continue for the foreseeable future.

ThePigSite News Desk

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