Moderate growth in the global pig market
Elevated prices for pigs are here to stay, at least for short time, according to the latest Rabobank outlook. Higher disease losses in key growing regions, along with the lagged impact of industry liquidation during the pandemic, have limited available hog supplies. Rabobank expects a gradual recovery in the herd, yet higher raising costs and demand uncertainty are expected to moderate the pace of growth. Lower production expectations have left the market short of pork, just as demand is beginning to strengthen. The imbalance is driving pork prices sharply higher in many markets, which is slowly being passed through to consumers, contributing to overall inflationary trends, according to the analysts.
China is one of the markets that influenced pig prices for the last couple of years. Currently, herd losses due to new ASF outbreaks and health challenges are slowing the recovery. While below earlier expectations, the sow herd is flat vs. 2020 and will expand through year-end as restocking efforts continue. Even with a projected production increase, China remains in a pork deficit and will continue large imports. Demand is weak due to the pandemic and high relative pork prices at retail.
Meantime, in the US, tighter supplies have driven prices 68% higher year-to-date. "Robust demand for hams and bellies, together with lower imports and limited frozen inventory, remains supportive. Labor availability remains a challenge and is contributing to product premiums. High pork prices are weighing on exports and are likely to remain a constraint on volumes," according to Rabobank's quarterly outlook.
A gradual recovery in demand in Europe has lifted pig prices up 22% in the first 4 months of the year. While still well below last year’s export-driven levels (-16% YOY), higher prices will help offset rising feed costs. Even with challenging conditions, production is growing in Spain, Denmark, and the Netherlands to offset slight declines in Germany and Italy. Exports remain strong, despite ASF-related trade bans on German pork.
For the Brazilian sector, an increase of 99% in feed costs is expected to be challenging as the demand in the domestic market remains weak due to pandemic lockdowns and the end of economic stimulus.
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