Slow production growth, rising prices - Rabobank on the global pork market

Global hog prices have risen sharply in most markets as processors scramble to find supplies. Large losses due to illness in key regions, as well as the lingering impact of industry shutdowns during the pandemic, have limited the choice of available hog suppliers. Rabobank expects a gradual recovery in the pig population, with projected cost increases and demand-related uncertainty offsetting growth rates. Reduced production forecasts lead to a shortage of pork in the market, while demand begins to pick up. The imbalance leads to sharp price increases in most markets, which are slowly passed on to consumers, contributing to general inflation trends.

China:  Livestock losses in China due to new outbreaks of ASF, as well as health problems in pigs, are slowing down the pace of recovery. While the sow population is below previous forecasts, it is unchanged from 2020 and will increase throughout the year as restocking efforts continue. Even with expected growth in production, there is still a shortage of pork in China, which will support large volumes of imports. Against the background of the pandemic and rather high retail prices, demand remains weak.

USA:  Due to the reduced supply of pigs and high prices for pork, prices have increased by 68% since the beginning of the year. Strong demand for ham and brisket, as well as low import volumes and limited frozen stocks, remain favorable. The availability of labor is still a problem, which contributes to the increase in the cost of production. High pork prices are negatively affecting exports and are likely to affect their volume.

Europe:  EU pig prices rose 22% year-to-date on the back of reduced supplies and a gradual increase in demand. While prices are still well below last year's levels driven by higher exports (-16% yoy), higher prices will help offset higher feed costs. Even with the problems, production in Spain, Denmark and the Netherlands is increasing, which offsets the decline in production in Germany and Italy. Exports remain strong despite ASF-related bans on the pork trade from Germany.

Brazil:  Producers are scrambling to offset the 99% increase in feed costs following late planting and poor harvest forecasts. Weak demand for pork due to the pandemic and the end of economic stimulus is canceling out all the benefits from record exports, which affects the prices of pigs and pork.