“The Chinese swine market is definitely under pressure right now. However, feed producers are set to gain from a recovery in the Chinese sow herd, a rebound in sight for early 2016, coupled with rising productivity arising out of the ongoing modernization taking place in pig farming there along with greater industry consolidation,” Albert Vernooij, research analyst at the Dutch bank, told FeedNavigator.
In February this year, the total hog and sow herds there were down 10% to 389.7 million head and 18.5% to 41.1 million head year-on-year, respectively.
The latest pork quarterly from Rabobank revealed piglet prices in China began trending upwards earlier than those for hog and pork, indicating a tighter situation in piglet supply, due to the shrinking sow herd.
“However, prices have yet to reach a level where farmers make positive margins. The hog-to-corn ratio, which is the indicator of farming margins, is still below the breakeven point,” said the Dutch swine market specialists.
They reported, though, that the number of piglets per sow per year and the carcass weight are increasing as the investments in facilities continue in China, with one of the largest hog farming companies there, Chuying Agri, expected to ramp up production by 50% this year.
The analysts noted China needs to continue to import genetics and know-how to spur further hog production productivity.
For the rest of 2015, they forecasted that China will increase pork imports considerably in order to fill in the periodic shortages for the rest of the year.
Southeast Asian trends
The Rabobank report also provided insight into how the pig sector is performing in Vietnam and the Philippines – two key Southeast Asian pork markets. “[Pork] prices [in both countries] remain strong enough to maintain profitability among producers, largely supported by lower feed prices,” said the analysts.
Pig production in Vietnam, according to official government statistics, is set to jump 2.4%. “The supply recovery is still on course after the 2013 liquidation, where producers exited pork farming driven by unfavorable margins,” said the Rabobank team.
The Philippines is set to see an increase of 2.55% in swine production in 2015, against the growth of 1% in 2014. “Russia is interested in importing pork from the Philippines and is currently in talks to get clarifications on trade regulations,” reported the researchers.
In terms of the US swine market, the pig industry experts estimated that hog slaughter levels jumped 4% over prior year levels through to March 2015, with weights, that were also up by about 1%, driving an increase in supply. “This level of supply growth was far above what the end of December [US Department of Agriculture] USDA hog report had indicated, which in turn caught the market largely by surprise,” concluded the team.
There have been far few cases of PEDv and mortality than feared this winter.
The hygiene protocol put in place as a result of the PEDv epidemic, said Vernooij, has resulted in a much lower level of PRRS virus infections on farms also. All of which, he said, should encourage production recovery there and will continue to challenge prices.
US inventories of market hogs as of 1 March this year were 7.2% above 2014 levels, which is mostly in line with the consensus of 6.8% growth, noted the report.
But the analysts expect hog weights, which have declined in recent weeks, to drop below 2014 levels in the summer.
Brazil and Mexico
Domestic consumption is expected to be buoyant in 2015 for pork in Brazil with beef prices set to remain high. In addition, grain prices, said the researchers, are likely to remain even more competitive than in 2014 which “should keep margins healthy for both the industry and independent producers [in Brazil].”
In Mexico, the sow inventory expansion continues and Rabobank anticipates it will grow by 7% year-on-year. “However, production may be limited to rising at that pace as a result of PEDv and other diseases such as the PRRS virus,” said the team.
The EU swine sector is set to see profitability all along the chain, from farmers to processors, under pressure. “At the farmer level, specialized breeders will experience negative margins, with piglet pries clearly below cost price and limited signs for improvement in [the second half] of 2015. Fatteners will reach margins slightly below break-even levels, even despite the positive impact of lower feed costs,” forecasted the researchers.
Q2 production, they noted, is expected to grow by about 2.6% based on the year-on-year growth in the number of pigs and piglets. Combined with the steady growth of the number of pigs sold per sow in the EU – up by 0.5 pigs per year between 2007 and 2013- and the growth in the slaughter weight, the researchers said EU pork production will increase by around 1.5% in 2015.