China’s pork imports were down 27 percent in the first eight months of this year, but are expected to rebound in the fourth quarter, according to a new report by Rabobank.
“The most significant story in global pork markets has been the substantial decline in China’s imports in recent months, which creates a risk of over-supplied global markets,” according to Chenjun Pan, RaboResearch Senior Analyst – Animal Protein. “However, we do expect China’s imports to pick up somewhat over the rest of the year.”
While the Rabobank Five-Nation Hog Price Index suggests a stronger pricing trend, the major importing countries will likely maintain steady import growth.
China’s pork farming structure has been impacted by stricter environmental policy enforcement. Despite the exit of many small farms, Rabobank maintains its forecast that production will increase by 2 percent in 2017. The research group expects prices to continue the downward trend, after holding at strong levels in summer.
China’s import demand has been one area of distortion in global pork markets over the past one to two years, and a diversion in prices for certain cuts has been another.
“Pork bellies have reached record levels in the US and some other markets, driven by strong demand, especially from foodservice,” said Justin Sherrard, RaboResearch Global Strategist – Animal Protein.
While high prices in the EU in the first half of 2017 contributed to declining exports as they reduced the EU’s competitiveness in trade flows, they also triggered an expansion in the sow herd. The slight dip in production in 2017 is likely to reverse in 2018, according to Rabobank and the EU will seek export opportunities for additional production.
U.S. pork production will continue to expand over the remainder of the year. Prices are expected to soften under supply pressure. Strong currencies will put extra pressure on the export business. With weaker demand from China offset by stronger demand from Mexico, Rabobank still expects total exports for 2017 to be higher than in 2016.
Brazilian pork exports increased around 18 percent by value in the first nine months of the year. By volume, they declined around 4 percent, particularly due to the slowdown in Chinese pork imports.
“Given favorable feed costs, we expect Brazilian production to continue rising in Q4 2017,” Rabobank predicted.