Chinese demand for pork imports surges – Rabobank

Production decreases and tightening government regulations in China create an opportunity for EU and North American pork producers.

Dwindling domestic supply in China pushed pork prices up sharply in the first half of 2016, according to a recent report from Rabobank.

EU, US and Canadian pork producers are best positioned to benefit from a surge in Chinese demand for imports, the report found.

China’s domestic pork production has slowed in the past two years, thanks in part to government shutdowns of sub-standard farms. Production decreases driven by previously low prices have also shrunk the Chinese sow herd to a historic low, according to the report.

Pork prices in China have risen to 20 yuan a kilo, up from 18 in January of this year.

“China needs to increase imports to cover the supply gap in 2016. In total, we expect China to increase pork imports by 30 percent. The EU, the US and Canada are well-positioned to increase exports to China given their availability of product,” said Chunjun Pan, a Rabobank senior animal protein analyst in a statement.

In the near-term, an increase in prices could be good news after US pork exporters have experienced slowing growth in China. A University of Illinois at Urbana-Champaign report also found that a strengthening dollar could allow EU pork producers to wrench market share away from competitors in the US, following Brexit-driven, unfavourable currency shifts. It also warned that the UK leave vote could have a negative impact on global economic growth and demand.

Chinese pork production should recover in 2017, but imports will continue to remain high due to their superior quality and lower price, the Rabobank report found.