It said Chinese imports would expand in the second half of 2015 and into 2016. This is because of the “enormous cull” of China’s herds over the last 18 months, which have put pressure on production, pushing up prices and industry margins into the black.
It said this would have a positive impact on pork prices and industry margins across the globe. The result would be a further rise in the Rabobank five-nation hog price index.
The pork market “bottomed out” at the end of Q1 and into Q2, but recovered with rising prices in almost all the main importing and export countries.
Global pork market
It predicted that the global pork market would continue its recovery through Q3, which will be driven by the expected growth in Chinese imports.
The US the market will continue its “steady improvement”, but the report questioned whether its recovery can carry on as the strong supply rebound will likely be partially absorbed by expected growth in exports to China.
It said that even though the US has the most volume of available hogs it has a “challenging position” due to the high value of the US dollar and the limited availability of ractopamine-free pork.
The report also said that the EU market has “ample opportunities” for price and margin improvement. It said that productivity has driven a “supply surge” and stock levels were high. Brazil, it predicted, would remain a positive market driven by exports and high beef prices. Profit margins for hog producers in Canada have improved in Q2 as hog prices rose in line with the US.
Both Canada and Brazil are likely to be able to fill part of the extra China demand, but they only have limited volumes.
The continuing disease outbreaks in Mexico and South Korea will mean high prices and strong demand for imports, while the Japan market is getting back to normal after the impact of disease outbreaks and the West Coast ports labour dispute, which affected imports.
Rabobank animal protein analyst Albert Vernooij said: “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.”