A drop in Chinese imports is expected to cause a global oversupply in pork meat.
According to the Rabobank Pork Quarterly report for Q4 2017, the global pork supply is expected to increase further, mainly driven by China, the US, Canada, and Brazil. Pork imports to China alone were down by 27% in the first eight months, but are expected to rebound later on in the year.
“The most significant story in global pork markets has been the substantial decline in China’s imports in recent months, which creates a risk of over-supplied global markets,” said Chenjun Pan, RaboResearch senior analyst – animal protein. “However, we do expect China’s imports to pick up somewhat over the rest of the year.”
While the Rabobank Five-Nation Hog Price Index suggests a stronger pricing trend, the major importing countries will likely maintain steady import growth.
China’s pork farming structure has been impacted by stricter environmental policy enforcement. Despite the exit of many small farms, Rabobank maintains its forecast for 2017, with production increasing by 2%. It expects prices to continue the downward trend, after holding at strong levels in summer.
China’s import demand has been one area of distortion in global pork markets over the past one to two years, and a diversion in prices for certain cuts has been another. “Pork bellies have reached record levels in the US and some other markets, driven by strong demand, especially from foodservice,” said Justin Sherrard, RaboResearch global strategist – animal protein.
In the EU, pork production declined in most major producing countries such as the UK, France, Italy, Netherlands, Germany and Poland, with a “more mixed” picture in Denmark. Spain saw a slight increase in production. Total exports from the EU also declined over the first seven months of 2017, also driven by the drop in Chinese imports. The report does show that exports to other major destinations including Japan, Korea, the Philippines and the US have all risen.
US pork production is expected to grow over the rest of the year with prices expected to soften under supply pressure. Rabobank predicts that strong currencies will put extra pressure on the US pork export business.
Source: Aidan Fortune, Food Navigator Asia