Report: Pork market expected to improve

July 26, 2013

Rabobank has published a new report on the global pork industry, forecasting an improved market, but later and with lower prices than previously expected.

In the report, published by the bank's Food & Agribusiness Research and Advisory team, the bank says it expects a positive landscape for the pork industry in the second half of 2013 and into 2014, with limited supply growth, a likely increase in demand in China toward the festival season, and continuing high beef and poultry prices.

However, the bank predicts that price increases will be limited due to high stock levels resulting from a disappointing first half of 2013 across the globe, as well as the continuing effect on demand of the economic crisis, mainly in the developed world.

"With declining feed costs resulting from bumper harvests, a subdued price increase will support a much needed margin recovery across the globe," said Albert Vernooij, Rabobank analyst and the report's author. "However, due to both the slow increase of pig prices and slow decline of feed costs, it is questionable whether this will be enough to fully cover losses endured in the first half of 2013."

Global drivers

The Rabobank five-nation finished hog price index rebounded in the latter half of the second quarter of 2013, supported by improving conditions globally. In the European Union, continued pressure on consumer demand continues to hamper market recovery, despite lower supply and rising exports. However, prices recovered in China, supported by the outbreak of the avian flu in poultry, which resulted in a consumer move to pork.

In the U.S., prices have also recovered following the loss of key export markets, due to an increase in seasonal demand and lower-than-expected supplies.

Pork markets are benefiting from relatively high prices for both beef and poultry, but will be negatively influenced by the continuing difficult economic conditions in key markets. Rabobank expects a slight increase in overall global pork consumption in the second half of 2013, due in part to the start of the festival season in China. This will support rising prices, but will likely be limited due to the current large stocks across the globe.

Shuanghui takeover of Smithfield

Longer term, Rabobank believes the announced acquisition of U.S.-based Smithfield Foods by Chinese firm Shuanghui International highlights the increased importance of global trade for the pork industry. The limited number of relevant countries, growth in demand, grain deficits in Asia, and continuing volatility mean that the Smithfield takeover may be a trigger for future steps. In order to secure supply, other importers may look to follow suit.

Read more supply chain news.

Topics: Equipment & Supplies , Trends / Statistics

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