Rabobank: pork supply outpaces demand

Despite the slowdown, the bank notes that Chinese imports will continue to be an important driver of the global pork market.

Rabobank expects its Five Nation Hog Price Index tracking global pork prices to decline in the fourth quarter amid slowing import demand from China.

Environmental regulation and price volatility have forced some domestic Chinese pork producers to shut down, resulting in a surge of imports, but demand is still down due in part to high levels of supply built up during the first three quarters of the year.

The index (see chart) shows that declines of roughly 15 percent have already occurred between 2014 and now, with plenty of peaks and troughs along the way.

Despite the expected slowdown, the bank said that Chinese imports will continue to be an important driver of the global pork market.

Rabobank’s five-nation hog index (click to expand)

“Export to China is driving –and will continue to drive – global hog prices in 2017, with the EU losing export share to its competitors from the Americas,” the report said. “Having access to and being competitive in this important market is, therefore, key for both farmers and processors.”

The bank said it expects EU producers to remain the main source of Chinese pork imports, but they will face increased competition in the market from Canadian producers, which, like the their European counterparts, produce ractopamine-free pork. Ractopamine is a feed additive that is banned in China but used widely in the US.

In the US, Rabobank said pork supply has increased more than expected due to stalling exports and faces further pressure in the way of competition from beef and poultry. The bank expects these conditions to continue into the New Year, when new slaughter capacity comes online.