Positive landscape for the pork industry
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UTRECHT, The Netherlands – Global pork markets are poised for improvements in the second half of 2013 and into 2014, but supply concerns and demand pressures could limit price increases for pork, according to Alber Vernooij, writing for Rabobank Pork Quarterly
“With declining feed costs resulting from bumper harvests, a subdued price increase will support much needed margin recovery across the globe,” said Vernooij, a Rabobank analyst. “However, due to the slowness of both the increase of pig prices and the decline of feed costs, it is questionable whether this will be enough to fully cover losses endured in 1H 2013.”
Rabobank said its outlook for the second half of 2013 dependent on prospects for demand for pork. Pork production is forecast to slightly increase, and higher prices for beef and poultry are pushing consumers to switch to pork. But continuing economic difficulties in key markets will continue to pressure the pork industry, according to Vernooij. Rabobank is forecasting a slight increase in overall global pork consumption in the second half of 2013, driven by the start of China's festival season. Increased demand from China will support higher prices for pork but will limit how high prices will climb due to large global stocks of pork.
Regionally, the Rabobank five-nation finished hog price index rebounded in the second half of Q2 2013. The European Union will continue to experience difficulties due to continuing pressure on consumer demand that is hampering a market recovery. However, China's pork prices recovered as an outbreak of H7N9 avian influenza in poultry resulted in a consumer move to pork. US pork prices also recovered due to an increase in seasonal demand and lower-than-expected supplies.
Longer term, Rabobank believes the Smithfield Foods Inc. buyout by Hong Kong-based Shuanghui International Holdings may trigger similar transactions in the future as importers look secure supplies of pork while facing a limited number of relevant countries, growing demand, grain deficits in Asia, and continuing volatility.