Pork Commentary: Rabobank Recognises China’s Pork Import Potential29 July 2015
CANADA - Last week Rabobank, the world’s largest Ag-Bank released their third quarter perspective on Global Pork Markets, writes Jim Long President – CEO Genesus Inc.
“The enormous cull” of China’s hog herd over the last 18 months is pressuring production, causing China to expand imports into 2016.
Rabobank animal protein analyst Albert Vernooji says, “The main questions are when Chinese Import growth will start, how much volume growth there will be and what the support for pork prices will be across the globe.”
Rabobank also says:
- China’s imports will expand second half of 2015 and into 2016.
- In the US, the question is if Q2’s margin recovery will continue, as the strong supply rebound will likely be partially absorbed by expected growth in exports to China.
- The EU market has ample opportunities for price and margin improvement.
- Continuing disease outbreaks in Mexico and South Korea support high prices and strong import demands.
We agree with Rabobank about China’s import potential here and now.
Three Key Numbers:
- China market hog inventory is 57 million lower than 2 years ago – down 2 million head a week.
- China sow inventory is down 10.3 million from two years ago.
- China market hog price is now $1.25 US live weight a pound. Mid-April it was 85? a pound US. That is a price increase of $100 per head.
Less hogs, less sows, and the most important part, hog prices that have rocketed higher reflecting decreased supply and solid demand. The spread between China and the US live weight price is about 70? or $175 per head!!! We are betting that this very moment this price spread is leading to loading of containers of pork to be shipped now. Capitalism will push pork to China.
China owned Smithfield Foods will lead the way. If they could move 100,000 carcass equivalent a week and gain $100 per head margin that is $10 million a week. Bet that China will keep American supply open!
Country of Origin Labelling
Senate Agriculture Chairman Pat Roberts (R-Kansas) last Thursday offered an amendment to a highway-funding bill to repeal country of origin labelling requirements for beef, pork, and poultry and stave off trade retaliation from Canada and Mexico. A move hailed by NPPC – National Pork Producers Council.
According to Iowa State University economist Dermot Hayes, the average US pork producer is expected to lose $10 per head beginning later this year and into next year, and based on these estimates retaliation from Canada and Mexico against US pork will likely double pork producer losses.
Let’s hope the US senate supports Senator Robert’s amendment and business can get getting on.
|Author: Jim Long, President & CEO, Genesus Genetics|
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