The Dutch bank’s RaboResearch division recently published its pork quarterly for Q3 2017
Chinese traders are taking a more cautious approach to pig meat imports in 2017, noted the authors of the report.
In the first five months of 2017, China’s pork imports were flat, which contrasts with the significant growth seen in 1H 2016, according to the quarterly.
The analysts said recovery of local production in China and strong international prices are the two factors likely responsible for slower imports. Pork prices have declined by 30% in China, from the record levels of last year, said the analysts.
Rabobank holds the view that China’s pork production will increase by about 2% in 2017. Hog production recovery there was faster than expected in 1H, as many producers shared a positive view of the market and made rapid herd replenishments. While the expansion of hog production should continue in 2H 2017, it has been slowed by the price plunge in Q2, said the authors.
High EU prices
The pork quarterly also noted slower pork exports from the EU due to strong prices.
Tight supply and firm demand have maintained upward pressure on prices and are starting to challenge exporters, said the team. In this context, the recently announced trade pact with Japan, offering tariff reductions, is good news for European exporters, they added.
“Japan is Europe’s second biggest trade partner for pig products after China and Hong Kong. So the deal is not going to open up the Japanese market in a radical new way, but it will expand the trade; the tariff reductions under the deal will be the big opportunity, allowing Europe to out compete other exporters,” Justin Sherrard, global strategist, animal protein at RaboResearch, told us last month.
Japan imposes a complex import regime for pork called the gate price mechanism, which effectively sets a minimum price for pork imports, designed to support the competitive position of local producers. While Japan will most likely retain this mechanism under the new agreement, EU exporters will benefit from a reduction in the tariff boundaries applied, he said.
US policy impact
In terms of the US, pork exports still face uncertainty due to potential trade policy changes and a strong currency. However, the analysts reported US exports have been better than expected thus far in 2017.
“With weaker demand from China offset by stronger demand from Mexico, total exports are expected to increase by about 10%, compared with 2016. Increasing US exports are becoming even more important as production continues to expand.”
In Brazil, the political turmoil continues to affect all meat production sectors.
“Brazil faces great challenges due to political turmoil, and exports in recent months have declined significantly. However, even with these challenges, Brazil’s pork market is still expected to deliver a positive result, due to lower supply, favorable feed prices, and a favorable exchange rate.”