Rabobank’s five-nation hog price index will bottom out in the next three months after a stronger-than-expected drop in pork prices in 2015.
The average international price is now at its lowest level since 2006, Rabobank say. Despite the weak price and bleak outlook for January to March, growing supply and modest demand development mean there are positives for the industry as it moves from Q1 into Q2.
Brazil to fare well
“Recent positive demand and price developments in importing countries will start to support prices in exporting countries during Q1”, said Albert Vernooij, analyst of animal protein at Rabobank.
Brazil is one of the countries predicted to fare well in Q1. The market will follow its healthy progress seen in the last quarter of 2015 as demand for pork - domestic and abroad - grows. Rabobank’s Global Pork Quarterly report does, however, state that this progress will not result in higher prices as Brazil faces home-grown economic challenges, coupled with low international pork prices.
US to slow down
According to the report, the EU is struggling with low pig meat prices as Russia’s trade embargo has created a situation in which pork supply outstrips demand. To counter the growing surplus of European pork, Rabobank said the reimplementation of Private Storage Aid – which was suspended by the European Commission on January 21 – is “critical for further market support”.
On China, Rabobank said it will continue to import more pork in 2016. Strong domestic prices, additional destocking of the sow herd and stricter environmental regulations will render China as an importer buyer of international pork this year.
In the US, expansion in the pork sector is predicted to slow down after strong supply growth in 2015. Rabobank expects exports to pick up and this will be supported by low prices and repeals on the country-of-origin-labelling (COOL) rule.