A rush of panic from Chinese pork farmers prompted by flooding in several regions of the country and short-term supply adjustments led to a surge in slaughtering. This means the world’s largest pork importer is expected to up its intake of pork again.
Justin Sherrard, Rabobank’s senior animal protein strategist, claims China will see a pork prices peak in the next six months. Rabobank’s Global Q3 Pork report, published on 12 June, forecasts the price to peak in three months, but Sherrard confirmed Chinese consumers will have to pay record prices for at least another six months.
“This is ongoing good news for all countries which are exporting pork into China. It’s not such good news if you’re a Chinese consumer as the already-high prices will last all the way through the year,” said Sherrard.
With prices set to peak, Rabobank expects this to support imports which could exceed 2m tonnes in 2016
This is a positive situation pork businesses find themselves in. A continuation of upward movement in global pork prices will boost the sector, particularly in Europe which has weathered hardship ever since Russia’s damaging ban on EU pork.
Sherrard said the key takeaway from the Q3 Pork report is that Rabobank expects to “see this upward swing in pork prices continuing into the back half of the year.”
China’s rising demand is expected to support margins around the world. But Albert Vernooij, animal protein analyst at Rabobank, believes the Brexit-induced changes in exchange rates remains a wildcard that could “negatively impact the upswing” in pork prices.
Although financial markets appear to have settled a little after the shock Brexit vote, the readjustment in value between the euro-sterling swap means the EU pork industry faces a challenge to limit supply expansion.
“We do see scope for ongoing currency adjustments to impact on the price of imports into the UK,” said Sherrard. “There are plenty of European exporters ready to jump into the British market should the opportunity arise. And it makes us wonder what is going to happen next.
“Are we going to see an easing of demand or will we see [UK] consumers willing to pay a bit more for bacon? It’s too early to say because the real price adjustment is yet to filter through into the retail world and that will happen over the next month or so. Locally, this is the thing to watch most closely in Europe.”
Globally, China is the market to watch, with EU nations Germany, Spain and Denmark poised to capitalise on its insatiable appetite for pork.