‘Competition in key pig meat importing markets, particularly in China, to intensify’

By Jane Byrne contact

- Last updated on GMT

© istock/Jevtic
© istock/Jevtic

Related tags: International trade, Eu

RaboResearch’s latest pork quarterly sees Canada, the EU and the US continuing their battle for China’s pork market in 2018.

Expanding production in most regions means exports become more important in 2018,”​ said Justin Sherrard, RaboResearch global strategist.

China’s pork imports have been slowing down lately, but are expected to pick up again over the rest of the year, said the market specialists.

“China’s pork prices have been steady, due to a tight supply. This drop in availability follows capacity reductions triggered by stricter environmental policy enforcement in 2017. Despite the expected supply volatility in Q1, we maintain our forecast that production will continue to increase in 2018. While local prices will be volatile, pork imports are expected to rebound after a sharp decline in 2017.”

In Q1 2018, the Rabobank team expects global pork supply to increase further, mainly driven by the US, Canada, and Brazil.

Competition between the EU and the US pork suppliers for access to the Japanese market is also expected to remain intense. The EU exporters will slowly benefit, though, from the lower tariffs brought in under the recent EU-Japan free-trade agreement, said the research team.

Market focus

Rabobank noted that after a relatively short period of strong profitability, EU pig producers have reinvested for growth.

“As a result, we expect increased production to reach the market beginning in 2018. The additional supply is expected to pressure pig prices and cutout values. This price decline could stimulate consumption and exports. The latter is concentrated on Asian markets.”

The analysts expect that Spain will overtake Germany as the largest EU supplier to the Chinese market due, in a large part, to the increasing amount of pig meat available there. However, interestingly, Germany now represents over half of all EU exports to South Korea. 

Faster growth in US pork production, of 4.3%, will necessitate the free flow of exports and healthy domestic demand, they continued.

“Strong exports to start the year have intensified the competition for market hogs, to the detriment of packer returns. This increase has already provided an opportunity for producers to secure very good margins for much of 2018.”

In Canada, the analysts said that based on their predictions of limited herd growth of 2.5% in 2018, and favorable feed costs, producers there will be able to lock in strong profits for nearly all of this year.

In Brazil, local demand for pig meat is expected to increase, along with improving economic conditions.

“The expected stabilization of feed costs will continue to support good profitability for hog producers [in Brazil] for much of 2018. Pork exports to China in 2018 are expected to rebound strongly.”

They said, however, that Russia’s ban on Brazilian pork remains a wild card for 2018.

In Mexico, pork production is expected to grow another 2% in 2018. Last year, producers there faced some challenges in relation to feed prices due to exchange rate volatility.

Rabobank experts such volatility to continue this year citing ongoing uncertainty in relation to NAFTA negotiations and elections.  

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