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China will increase the demand for pork. Who is ready to respond?

Pork

Only a few major players in the market can take the burden of supplying the Chinese pork market in 2020 due to production constraints in some regions of the world.

Posted on Nov 20 ,09:26

China will increase the demand for pork. Who is ready to respond?

China will reach a peak in pork demand next year but only a few global suppliers that can respond fast to this situation, according to a Rabobank analysis. "Despite rising economic incentives, we expect a limited global production response, as environmental and regulatory constraints, along with the threat of African swine fever (ASF), constrain the industry’s ability to expand," explains Christine McCracken, Senior Analyst – Animal Protein.
Increased demand expected from the Asian country affected by ASF can be addressed by the US or Brazil, according to the analyst. "In the US, record hog slaughter is weighing on markets, depressing producer returns. Productivity gains continue to outpace expectations, adding further stress to an oversupplied domestic market. Robust exports are absorbing much of the production increase, yet have been unable to fully keep pace. Despite strong exports, Rabobank expects more moderate production growth in 2020.
For the Brazilian pork industry, exports to China continue at a strong pace and are 33% higher than the same period last year through September. Strong demand has driven a 17% improvement in price $2,297/metric ton) and a rebound in margins", said the report issued by the financial institution.
For the moment, European pork exporters with access to the Chinese market such as Spain, Germany, Denmark, the Netherlands and France have increased their presence in this region but the future doesn't look very bright for their chance to set an even stronger foothold in this market. "Europe remains the key supplier of pork to the global markets. Brisk exports of pork to China and other parts of Asia helped support a 31% YOY increase in prices and near-record margins. Reports of ASF in Europe have mostly affected feral swine populations, along with sporadic commercial cases," added Christine McCracken. However, tighter regulation on the environment, animal welfare and the risk of ASF virus reaching some other parts of the EU may slow down the growth rate of production in these countries.
For now, we have seen China reopening its pork market for Canada, with a clear intention to cover the animal protein deficit, and also granting access for US poultry after 5 years of ban. Still, increased demand for pork in China, associated with the holiday season, is expected to push the prices higher, following the model observed in September, when retail prices for pork have jumped by 70% month-on-month, as inventories were depleted following the surge in pork demand associated with the fall holidays.

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