Rabobank forecasts boost to global pig meat trade

During the second quarter of 2015, there were signs of recovery in the global pork market, according to the latest quarterly report on the state of the industry from Rabobank.
The recovery was attributed to upwards movement in prices in most of the countries participating in global trade in pork, particularly in the U.S., Canada and China, as the result of a limited increase in supply.
As its domestic pig population has been declining recently, Chinese demand from imported pork is expected to expand during the rest of this year and on into 2016.
“The main questions are when Chinese import growth will start, how much volume growth there will be and what the support for pork prices will be across the globe,” commented Albert Vernooij, Rabobank’s animal protein analyst.
There is some doubt over the prospects for the U.S., according to the report. If significant growth can be achieved in exports to China for the rest of this year, the improvement in margins during the second quarter of 2015 could continue despite the up-tick in production.
Lower production resulting from recent disease outbreaks in Mexico and South Korea are forecast to fuel further global pork trade.
By contrast to the other regions, pig meat production is flat in the European Union and Japan, according to Rabobank, which highlights the opportunities for improved prices and margins for the European pig sector.


Role of China in global pig meat supply
With China accounting for around half of the world’s pigs, it is no surprise that developments in the sector there have huge implications for the global picture.
Recently published, the OECD-FAO Agricultural Outlook 2015-2024 report projects that total meat production is projected to expand around 51 million tons by the end of the outlook period, and that Brazil and China will be the main contributors to this increase. 
For pork, China easily heads the league table with an expected increase in output of more than 6.3 million tons by 2024 from the base level in 2012-14., while second placed U.S. increases production by 1.26 million tons. These are followed by the Russian Federation, Brazil and Vietnam, each expected to boost output by between 800,000 and 900,000 tons over the same period.

Jackie Linden is a contributing writer for WATTAgNet.

Rabobank: Pork prices moderate in first quarter

The global pork industry searched for stability during the first quarter of 2015, with strong supply growth and relatively weak demand driving the market, Rabobank stated in its pork quarterly report for the second quarter. The report was released on April 17.
Pork prices are sharply lower, as robust global supply growth, which has been driven by the United States, Russia and Brazil, has outpaced rather subdued demand, dragging producer profitability into negative territory, the bank reported.
Rabobank animal protein analyst Albert Vernooij said: “The increasing competition in the global export market will result in continuous price and margin pressure in most countries around the globe. Therefore, after the buoyant — at least price-wise — last couple of years, the global pork industry is slowly moving towards the bottom of the cycle.”


U.S. pork outlook
In the U.S., as supply recovers after porcine epidemic diarrhea (PED) virus infection, the question is as to what degree recovery will be coupled with the strengthening U.S. dollar and lower prices.


EU pork outlook
In the EU, prices will follow seasonal developments, but will remain lower than the historical average and below break-even level.


Brazilian pork outlook
Brazilian prospects remain positive, but less buoyant than in the first quarter, driven by pressured domestic consumption and difficult Russian export negotiations.

Rabobank: Pork prices will keep breaking records in 3Q 2014

The global pork market is moving into record territory in the third quarter of 2014, especially in exporting countries impacted by porcine epidemic diarrhea (PED) virus, Rabobank reports.
According to Rabobank, hog and pork prices will continue to break records in countries such as the United States, Canada, Mexico, Japan and South Korea, where PED virus has been a factor. These record prices are expected to continue into the fourth quarter. In countries not impacted by PED virus, record hog prices in affected countries, plus the high prices for beef and poultry, will support bullish hog and pork prices.
Rabobank expects that markets in European Union (EU) and China will improve seasonally but will not reach the highs experienced in other countries.
“In the U.S., Mexico, Japan and South Korea, the countries that have been affected by PEDv, the key question will be ’Where to source pork?’ In these countries the supply drops, as well as declining feed costs, are expected to push farmer’s profitability into record territories. In contrast, processors’ margins will be pressured due to the strong competition for hogs,” said Rabobank analyst Albert Vernooij.
“With PEDv continuing to impact supply into 2015, prospects for the global pork industry remain positive. The main wildcard is keeping supply discipline, as many farmers will be tempted to expand production driven by the low feed costs and high profitability.”
Outlook for countries affected by PEDv
While the U.S. is mitigating the effects of PED virus on supply and prices with hog weights that have risen by nearly 5 percent since 2013, the growing scarcity of pork globally is pushing import prices up, impacting Mexico, South Korea and Japan in particular, Rabobank estimated.
In Mexico, pork meat prices have increased around 25 percent year-on-year and have the potential to increase another 5percent. Also feeling a significant impact is
Japan has also felt a significant impact, as imports are relatively expensive compared to other importing countries because of the yen’s low value. With beef supply also under pressure, Japanese processors will find it challenging to source sufficient meat supplies.
Chinese hog industry prospects positive
The prospects are turning positive in China, with hog prices forecast to recover after a very difficult beginning in 2014. Chinese pork prices are expected to stay at the current low level in most of the third quarter, but will likely show a strong rebound from the end of the third quarter onwards, driven by the seasonal uplift in demand and lower supply after the sow culling of the last months. A limited global supply will increase competition for imports and support higher prices. The key challenge for hog farmers to recover part of their losses is to limit herd expansion. Many smaller farmers will face shakeouts in 2014, according to Rabobank, which will advance market consolidation.
Favorable conditions for EU pork exports
Prospects for EU exports to Asia and the U.S. remain positive, as the EU is the only region with enough pork available at lower prices. However, this will not be enough to totally compensate the lower export to central and eastern European countries.
The Russian import ban remains a deciding factor for price levels. In addition, the importance of exports to central and eastern European countries for the total carcass valuation, in combination with the high value of the Euro will limit the seasonal increase of EU pork prices. However, if pork trade between EU and Russia reopens, it will boost EU pork prices.

Global pork industry Q4 2013 outlook

Global pork prices for the remainder of 2013 are forecast to remain elevated, according to Rabobank. The limited increase of sow herds in almost all regions shows that farmers are cautious to expand production. Despite the positive prospects with regard to the feed prices, farmers first want to regain part of the lost margins of the last few years before expanding production.
In the report, Rabobank's Food & Agribusiness Research and Advisory team says that the global pork industry has experienced a positive Q3:  in line with expectations, the Rabobank five-nation hog price index continued its upward trend, resulting in a peak of 162 percent in August, just below the last peak of 165 percent in August 2008.  The index declined at the end of Q3 due to the recovery of supply after the summer heat. However, the bank says that global pork prices are forecast to remain elevated for the remainder of the year, supported by demand resulting from start of the Chinese festival season.
Compared with Q2 2013, pork prices in Q3 2013 showed double digit increases in almost all major producing regions. The main drivers were tighter-than-expected supply in the U.S., due in part to the impact of the porcine epidemic diarrhea virus (PEDV); and in the EU, due to the impact of the EU's introduction of group housing of sows in January 2013, and continuing robust import demand.

2014 global pork outlook
Into 2014, Rabobank predicts that declining feed costs will continue to support slow herd rebuilding. Combined with productivity increases, this will result in higher supply and, likely, lower prices. However, the price slide will be slow due to the limited growth of sow numbers, the continuing demand growth in Asia and still relatively high feed costs, which will curb supply growth at least until mid-2014.
The approval of Shuanghui's acquisition of the largest global pork company, Smithfield, has been yet another sign of China's growing dominance in the global pork industry. The country's import demand has been exerting more and more influence on prices in different regions throughout the world in the last few years. The acquisition is but one illustration of China's ongoing search for sufficient pork supply to feed their growing and wealthier population, a situation which will continue for the foreseeable future.

Porcine epidemic diarrhea won't impact US pork prices until December

The presence of porcine epidemic diarrhea virus (PEDV) in the United States is not expected to affect pork prices until winter, industry experts say.
More than 300 cases have been confirmed in 16 states since its April discovery in the United States, infecting both sow and finishing operations. Because the disease can have a 100 percent mortality rate with piglets, the biggest financial impact of the disease will emerge in December when piglets lost in June would go to market. The affected pigs from finishing operations typically survive.
"It might be slowing slaughter down a little because those pigs that get sick won't grow for a few days, but I don't think there's been any immediate impact on pork prices," said Steve Meyer, president of Paragon Economics. "The impact will probably come in December."
Despite the number of confirmed cases, there is no measurable way to know how many pigs in the United States have been infected. Operators who detect PEDV are not required to report it to government agencies, so the only data available is from submitted tests, comments Meyer.
Based on the inconclusive data he has so far, Meyer expects slaughter of U.S. pigs to be reduced anywhere from 60,000 to 100,000 pigs a week in December, a 2 to 4 percent cut.  If that happens, he added, pork prices could go up anywhere from 4 to 12 percent.
Butch Baker, interim director of the Iowa Pork Industry Center, noticed pork prices increased around the time the virus was confirmed in the United States, but prices have since returned to expected levels. He, too, said prices won't change significantly until December.
Baker also did not expect PEDV to cause a decline in demand for pork or impact prices. Because it is only transmittable to pigs and does not affect food safety -- and the media so far has accurately spread that message -- it does not cause consumer worries like diseases that can infect humans.
PEDV containment is key
The number of reported PEDV cases are on the decline. On June 30, there were 19 new cases, Meyer said, compared to 47 new cases reported in each of the two previous weeks.
Meyer, however, cautions that may not be reflective of the situation. Because producers don't have to report cases, and now they better understand how to identify the virus, the number of existing cases could be going up or down.
How well the virus is controlled in upcoming months will be vital.
"If you have multiple weeks in a row without surviving piglets, that economic impact can be large when it gets into the breeding population," says Steve Moeller, Ohio State University swine extension specialist.
Moeller and Baker stress cleaning trucks of feces, and changing boots and clothing when moving from one pig herd to another to reduce the virus' spread.
Baker also believes medicines that can reduce the severity of PEDV could emerge.
"There are no PEDV vaccines, but some emergency vaccines are in the pipeline and could be on the market within weeks," he said.

Global pork prices to fall on limited growth in consumption

While global pork prices began 2013 at historically strong levels, some weakness in prices late in the first quarter and into the second quarter are estimated due to pressures on production and limited growth in global consumption levels, according to Rabobank's latest report.
2013 pork prices will be impacted by swing factors, including how much European production will decline due to sow pen regulations; China’s appetite for import; and whether U.S. production will continue to expand, despite the spike in feed costs. The pace of pork demand growth is the key unknown for industry margins in 2013, and is highly dependent upon economic growth in the developing world, according to Rabobank.
Global pork prices started 2013 supported by strong Chinese demand ahead of the Chinese New Year in February. However, price movements in China will be a key indicator for 2013 going into the second quarter as Rabobank expects global pork prices to come under slight pressure due to production growth in China, the U.S., Brazil and Russia being higher than the growth in global consumption.
Higher prices for pork are expected overall for 2013, as the 2012 drought in the U.S. and Black Sea regions has led to low inventories of feed crops and adverse weather in pork-producing countries continues to limit production expansion. There is also uncertainty regarding the pace and magnitude of EU enforcement of the ban on sow crates, which Rabobank forecasts will reduce the sow herd, keeping EU pork prices high.
However, Rabobank predicts that global prices will be at a lower average level than previously forecast, as the expected consequence of higher feed costs — herd liquidation — has not occurred, as producers in the U.S. have managed their risk by using futures contracts. “Despite the higher feed input costs, the U.S. swine breeding herd has modestly expanded and large scale farming continues to develop at a rapid pace in China, Russia and Brazil," said Rabobank analyst David Nelson said. "There seems to be limited opportunity for a significant increase in pork prices, given this expansion. Chinese hog supplies appear to be sufficient but their economy is recovering, which could stimulate demand growth.”
In developed pork markets, the challenge will come from managing soft demand and often excess capacity, according to Rabobank. As such, supply discipline will remain the key success factor for the pork industry’s performance in 2013 and beyond.

UK pig producers call for transparent pricing, stronger contracts

Organizations representing UK pig producers have called on Europe to consider more transparent pricing mechanisms and more robust contractual requirements to support the sector, highlighting the progress made in addressing issues within the dairy sector at an EU level as a potential model to deliver a more sustainable and balanced pork supply chain.
“Agriculture within Europe has already had to absorb the initial shocks of increased costs within the livestock sector without significant recompense from the market," said representatives of NFU Scotland, the Ulster Farmers’ Union and the National Pig Association in a letter to the European Commission. "No sector is more vulnerable to input feed costs than pig production. The EU has reviewed the operation of the milk market in Europe and intervened with new contractual standards and vehicles to empower producers. It is now imperative that a similar initiative is fast-tracked to underpin the EU pig sector."
According to the industry, in the present economic climate, producers face a perfect storm of cost escalation with no shelter from the competition of lower welfare systems and no significant support from the market. “Pig production has always been exposed to market forces with many producers now utilizing their own cereal resources or fixing costs through forward buying and contracts to smooth the effect of commodity movements on the production enterprise," said the letter. “That approach is becoming less viable as climate change drives extreme volatility in basic feed prices, and markets for pig meat are dominated by major retailers with the ability to control the market price at levels which are unsustainable."
Transparent price reporting should be in place throughout Europe, and maintaining an artificially low reporting price level is one factor that can stall the positive price movements that support production and provide a sustainable economic environment on farm, according to the organizations. In addition, "it is now essential that there are options for producers supplying the larger buyers or processors," they said. "It is not acceptable that animals are traded on a weekly offer price alone; there should be an option to supply through a contract, the price being defined by an agreed transparent pricing mechanism.
“This is a complex area, but it is crucial for EU consumers and producers that a sustainable framework is put in place to support the production of high welfare pig meat within the Union," said the letter. "Food security imperatives and food quality standards must mean that European pig meat is available through our retail network.”

Pig costs up, prices down as US drought impacts producers

U.S. hog producers are seeing increased feed costs and decreased pork prices, a combination resulting in some farmers selling their stock at a loss.
Corn on the futures market is at nearly $8 per bushel through summer 2013, roughly a 50-percent increase over prices before the drought that has hit the U.S. all season. At the same time, hog prices have dropped significantly, falling nearly 30 percent in the last six weeks due to an oversupply moving from farms to market. For the week ending September 14, pig producers lost an average of $36.15 per head, down roughly $7.00 from the week before when margins averaged a $29.00-per-head loss. One month prior to that pork producers were gaining $14.76 per head, and for the same period in 2011, producers were profiting by $11.77 per head.
The oversupply is coming from farmers who are trying to manage their costs by decreasing the size of their herds. "That's probably caused some producers to sell hogs a little bit sooner than they otherwise would," said Ron Plain, an agricultural economics professor at the University of Missouri. "To try to get them off the feed bill and that's probably impacted a bit on why we've had so many hogs to slaughter here in the last few weeks." Feed costs for pigs placed into the finishing unit as of September 14 is estimated at $136.32, according to Sterling Marketing. At the same time in 2011, that cost was $112.58.
In the short run, these lower prices might be good news for consumers, as wholesale prices have dropped 15 percent since mid-August, according to analysts. Lower prices should stimulate demand for pork, which may ultimately lead to better hog prices — but farmers say anything like that is still a long way off.

China pork prices may rise through early 2013

China's pork prices are expected to continue rising in the second half of 2012, due largely to global feed prices, according to Zheng Fengtian, vice president of Agricultural and Rural Development College, China People’s University.

Currently, the principal types of feed ingredients are corn and soybeans. However, due to the ongoing U.S. drought, many places that produce corn and soybeans have taken significant hits to production. The total output of soybeans, for example, may decrease by 20 percent to 30 percent in the latest harvest year, and China’s supply of soybeans relies primarily on imports. The future of China's pork prices is currently very uncertain, say experts, as there is the possibility of large fluctuations that will lead to increases through the early months of 2013.
According to Li Guoxiang, the deputy director of the Rural Development Laboratory of the Academy of Social Sciences’ Macroscopic Economy Lab, the rise in pork prices will definitely influence China's consumer price index. However, in the second half of 2012, the index will rebound. The four-season nature of pork prices is currently leading to a small rise, but as long as the increase is not large, the index will not be greatly affected. Even though pork prices are expected to increase, the elements that influence the consumer price index may decrease, thereby negating the effects of pork prices.

Pork producers council supports new provision of price reporting law

The National Pork Producers Council has said they support the release of a final rule to implement the wholesale pork reporting provision of the federal mandatory price reporting law, which requires meat packers to report price data to the U.S. Department of Agriculture’s Agricultural Marketing Service.
The rule outlines what information packers will be required to submit to the Agricultural Marketing Service, how the information should be submitted and other requirements. Packers will be required to submit the price of each sale, quantity and other characteristics, such as the type of sale, item description and destination of the product. The Agricultural Marketing Service will use the data to produce timely, meaningful market reports.

“America’s pork producers are grateful for the USDA’s cooperation in helping develop this valuable tool for pork producers since it is becoming increasingly common to sell hogs based on the cutout price,” said council President R.C. Hunt. “This important addition to the price reporting law allows for a more competitive market and will provide greater transparency in the livestock market.”

Pig meat prices to remain high in 2011

Retail pork prices are expected to drop only slightly in 2012.

Hog and pork prices are expected to remain at or near record highs for the remainder of 2011, according to the latest U.S. Department of Agriculture report, supported in large part by accelerating pork exports.
The USDA raised its forecasts for both third- and fourth-quarter 2011 pork exports, with shipments to Asia and North America expected to be particularly robust. Third-quarter exports are expected to be 1.2 billion pounds, more than 26% higher than the same time in 2010. Fourth-quarter exports are forecast to be 1.3 billion pounds, more than 13% above 2010 numbers. In total, U.S. pork exports will likely exceed 5 billion pounds, both this year, at just over 5 billion pounds, and in 2012, at 5.1 billion pounds.
While second-half U.S. commercial pork production is anticipated to be slightly higher than a year ago, strong export demand is tightening domestic pork supplies, contributing to record prices for hogs and for prices of wholesale and retail pork, according to the report. In fact, it is likely that 22.1% of U.S. pork production will be exported in 2011. In conjunction with strong exports is lower available pork per capita. Retail weight per capita pork disappearance is expected to be 45.9 pounds, down from 47.7 pounds in 2010.
U.S. consumers are paying higher retail pork prices for lower domestic supplies. July retail pork prices were $3.481 per pound, down just slightly from the all-time record-high retail price of $3.484 in June, and almost 9.3% higher than in July 2010. Retail prices are expected to remain in the neighborhood of the mid-$3.40s for the balance of 2011, with 2012 expected to average in the low-$3.40s per pound.

South Africa pork prices may drop 15% due to export ban

Pork prices in South Africa may drop up to 15% after the country's recent ban on exports of meat and live animals due to a foot-and-mouth disease outbreak, according to reports.
The South Africa Department of Agriculture, Forestry and Fisheries announced on Feb. 28, that it was halting exports of cattle, sheep and other cloven-hoof animals and their products for at least three months after roughly 300 animals tested positive for the virus. There are about 4,000 commercial pig farmers in South Africa, employing 10,000 people.
According to Jacobus Hoffman, general manager of Premier Pork Producers, while only 3% of local production is exported, the additional meat will drive down prices as local producers compete with imports from Canada and Germany.

Canadian pork producers seek insurance against market fluctuations

Ontario Pork in Canada has teamed up with the provincial cattlemen’s association to campaign for an insurance program that would protect local producers against the worst effects of market fluctuation.
The pork sector in Ontario has seen a decrease of more than 20% in sow numbers since 2007, says Ontario Pork, due to various factors including the high exchange value of the Canadian dollar and its negative effects on meat exports and imports. With multiple economic threats occurring over an extended period of time, the organization declares, the current AgriStability program in the province is not enough on its own to sustain the industry.
The beef business in Ontario is in a similar predicament, so pork producers and cattlemen say they are ready to partner with the provincial and federal governments to establish insurance arrangements that would protect against market fluctuations and allow all partners to share and limit risk. The proposed insurance program would see local Ontario farmers in the beef and pork industries pay premiums to the government representing 30% of the long-term cost of the insurance program on a voluntary basis. The governments at the province and country levels are being asked to participate according to the traditional 60/40 federal/provincial split.
“Not only would the program offset the difference between the current market price and the average long-term cost of production, it would also eliminate the need for ad hoc government support for both the beef and pork industries in the future,” said Wilma Jeffray, who chairs Ontario Pork.

China looks to state reserves to stabilize pork prices

The Chinese government has sold its second batch this year of frozen pork from state reserves to help stabilize prices, the Ministry of Commerce said on Nov. 10.
The country has "entered its peak season for pork consumption," with average wholesale prices in major cities "up 3.9% since early September to 17.95 yuan (US$2.70) per kilogram," the ministry said in a statement on its website. The statement did not say how much frozen pork has been sold. Pork prices will continue to be closely monitored as they form an important part of the consumer price index.
The National Bureau of Statistics is due to release CPI figures on Nov. 11, with some pundits estimating the measure in October might have risen to a two-year high of more than 4%.

Strong bacon market creates jump in hog futures

Hog futures are sitting at the highest price in almost three weeks as U.S. bacon supplies fall short of consumer demand, according to Bloomberg Businessweek.
Wholesale pork bellies hit their highest price since January 1998, jumping 7.9% on Wednesday to $1.332 a pound, while stockpiles monitored by the Chicago Mercantile Exchange fell 70 percent from 2009. "The bacon market will probably lead pork products higher in the next several weeks," said Paul Beere, a market advisor at Prime Agricultural Services in Brookfield, Wis. Low supplies, he said, are due mostly to herd liquidation and a rebound in demand.
Hog futures have jumped 47% in the last year as demand recovered from the recession and the H1N1 virus while supplies declined. U.S. bacon retail prices climbed to $4.046 a pound in June, the highest level seen since at least 1980, according to the Bureau of Labor Statistics.

Outlook for feed prices up

Feed grain prices are expected to rise in 2010-11, according to a new report from the U.S. Department of Agriculture Economic Research Service. The July 13 Feed Outlook report forecasts an increase in prices for corn, sorghum, barley and oats this month, with ending stocks projected lower. Feed grain production and planted harvest area to be up from 2009 for corn, offsetting reductions for sorghum, barley, and oats.
The report also reported an increase in pork and broiler production in 2011. Data shows a 2% increase for pork as hog farmers continue to see gains in pigs per litter. Hatchery figures also hatchery data shows growth in bird numbers and increasing weights, with broiler production expected to be up 3% in 2011 from 2010 projections.

Pork prices rebound

BusinessWeek reports that pork prices are set to hit record highs this year as a result of high feed costs linked to demand for ethanol. The magazine reported that many swine producers have reduced their herds in response to rising feed costs, resulting in more demand than supply.
Demand is increasing as the economy rebounds and countries lift bans on U.S. pork, which were put in place last year over fears of swine flu. On the Chicago Mercantile Exchange, hog futures nearly doubled between August 2009 and late April 2010, while the wholesale cost of pork increased 25% in April to almost 91 cents per pound.

Canada hog herd smallest in 12 years

Canada’s hog farmers are continuing with planned downsizing in the wake of a Statistics Canada report that the country’s hog numbers have hit their lowest point in a dozen years, according to Reuters. The national herd shrunk 4.5% to 11.63 million from January 1, 2009, to January 1, 2010.
A planned downsizing that includes government incentives to help farmers leave the swine industry should help bring the price of hogs back up, said Andrew Dickson, general manager of the Manitoba Pork Council. He told Reuters that farmers need CAN$140 per pig to recoup their costs and another CAN$20 to manage their debts, but are commanding just CAN$127 a head.
Statistics Canada attributed the national herd’s decline to high grain prices and a drop in exports to the United States. New U.S. regulations requiring meat at retail to be labeled with its country of origin have put a crimp on trade.

Philippines: Prices expected to rise for poultry, pork

A drought caused by El Niño could lead to poor livestock growth and raise prices for pork and chicken, according to GMA Network, a Philippine media organization. The Bureau of Animal Industry said that the Philippines currently has a stock of about 5 million kilograms each of chicken and pork. Small-scale farmers, who produce about 75% of the country’s poultry and swine, are the most likely to suffer from the drought, the bureau said.
The government is planning to spend P1.7B on drought mitigation, including cloud-seeding efforts. The drought is expected to cost the agriculture sector P10B in the dry season and up to P56.4B through the year, according to government figures cited by GMA Network.

China pork prices to even out in 2010

China's Ministry of Commerce expects the country's pork production and prices to even out in 2010, according to Xinhua news agency. Prices are currently recovering from a steep drop in early 2009.
Oversupply led the live hog price to fall 40% to ¥9.56 (US$1.41) per kilogram from June 2008 to June 2009. But some of the loss was recovered by the end of the year, with the live hog price reaching ¥12.36 per kilogram by the first week of 2010, according to a ministry official.