Pork Quarterly Q4 2017: Steady Growth in Production Brings Trade into Sharper Focus

Looking into Q4 2017, global pork supply is expected to increase further, mainly driven by China, the US, Canada, and Brazil. While China’s pork imports have slowed down recently, they are likely to pick up again later this year, according to RaboResearch’s latest global Pork Quarterly.

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“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,” according to 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, we maintain our forecast for 2017, with production increasing by 2%. Prices will continue the downward trend, after holding at strong levels in summer. Pork imports were down by 27% in the first eight months, but may rebound over Q4 2017. 

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,” says Justin Sherrard, RaboResearch Global Strategist – Animal Protein. The feature article of this quarterly explains what has been pushing up pork belly prices and how these high prices distort overall markets.

Other highlights from the Pork Quarterly Q4 2017 include:

EU: exports continue to decline

While high prices in 1H 2017 contributed to declining exports as they reduced the EU’s competitiveness in trade flows, they also triggered an expansion in the sow herd. The slight dip in production in 2017 is likely to reverse in 2018. The EU will seek export opportunities for additional production.

US: prices under pressure as production grows

US pork production will continue to expand over the remainder of the year. Prices are expected to soften under supply pressure. Strong currencies will put extra pressure on the export business (see Figure 2). With weaker demand from China offset by stronger demand from Mexico, we still expect total exports for 2017 to be higher than in 2016.

Brazil: export to China declined significantly

Brazilian pork exports increased around 18% by value in the first nine months of the year. By volume, they declined around 4%, particularly due to the slowdown in Chinese pork imports. Given favourable feed costs, we expect Brazilian production to continue rising in Q4 2017.

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