Pork industry faces supply-demand issues
July 25, 2014
by Meat&Poultry Staff
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NEW YORK – The global pork industry is looking at record prices heading into the third quarter, according to a new Rabobank report.
Exporting countries impacted by porcine epidemic diarrhea virus (PEDv) will continue to see record-breaking prices for hogs and pork, Rabobank’s Food & Agribusiness Research team noted. Higher prices for beef and poultry will be supportive of higher prices for hogs and pork across the globe. However, the European Union and China will not see the record prices experienced in other countries, although both markets will improve seasonally, according to Rabobank.
“In the US, Mexico, Japan and South Korea – the countries that have been affected by PEDv – the key question will be, ‘Where to source pork?,’” said Albert Vernooij, Rabobank analyst. “In those countries the decline in supply, along with declining feed costs, are expected to push farmers’ profitability into record territories. In contrast, processors’ margins will be pressured due to the strong competition for hogs.”
Higher prices for pork are having a significant impact on importing countries such as Mexico, Japan and South Korea, Rabobank analysts noted. Prices for pork have jumped 25 percent year-over-year in Mexico and have the potential to gain another 5 percent. Meanwhile, Japan is especially feeling the pinch of higher prices because of the low value of the yen. Meat processors in Japan will be challenged to find sufficient supplies of red meat with beef supplies also under pressure, according to Rabobank.
The EU has the most positive prospects for exports to Asia and the US, Rabobank analysts reported, because the region has enough pork available at reasonable prices. However, exports to Asia and the US will not offset lower exports to central and eastern European Countries. Resolving Russia's import ban on pork from the EU will determine price levels, according to Rabobank.