A recently published report on the global pork industry by Rabobank says the hot international markets are cooling down.
Rabobank’s Food & Agribusiness Research team says that, although the peak of the 2014 porcine epidemic diarrhea virus (PEDV) outbreak is past, the global pork industry faces another challenge from the Russian import ban affecting European Union (EU), U.S. and Canadian markets, which is resulting in a rapidly changing trade landscape.
Rabobank says that beneficiaries of the ban include Brazil, which has seen a 30% per kilogram price surge, while the EU has seen prices drop by 9% with no sign of recovery. Even taking into account the positive impact of declining feed costs on margins, it will be a disappointing year for the EU pork industry, Rabobank says.
Rabobank’s Food & AgriBusiness Research team took a regional glance at the world’s swine industry. The team feels China’s subdued supply and rebounding demand will support market recovery and import growth toward the seasonal high in the first quarter of 2015. Also, Chinese hog farmers are expected to finally make money as feed costs are expected to fall next year.
Right here in the United States pork prices supported by the impact of PEDV were further supported by consumers trading down due to higher beef prices, giving hog producers one of the highest margin periods in the industry’s history. Next year should be a year of increased production, though the impact of PEDV returning this winter looms. The third quarter of this year has been disappointing for the EU pork industry, falling from July as Russia extended its ban to the United States and Canada, and the Rabobank team sees both consumption levels and export levels remaining under pressure for the remainder of the year.
Brazil saw record pork prices in the third quarter as exports to Russia were up 18% volume, representing almost 50% of Brazil’s pork export value. This might pose a significant risk in the future should the situation normalize. A positive fourth quarter is expected.
Hog prices fell dramatically in the third quarter in Canada, driven by rising competition for other markets as exports were directed away from Russia - a situation which will likely continue until the ban is lifted. The dark horse for 2015 will be the possible impact of PEDV, despite largely dodging the virus so far. The Japanese pork market is doing well with consumption stabilizing despite surging imports and higher retail price resulting from the depreciation of the Yen against the U.S. dollar and high priced competing proteins. Resulting high stock will pressure imports in the remainder of 2015.
Mexico experienced the biggest PEDV impact this summer with year-over-year slaughter numbers down 11.1%, slightly higher than anticipated. Margins will set a record high in 2014 due to declining feed costs and higher hog prices. South Korea is experiencing a higher-than-expected supply, due to smaller-than-anticipated levels of PEDV, resulting in a relatively large hog and wholesale price drop. Prices will remain firm going into 2015.