Rabobank quarterly report
Pig farming scores above average
Pig farming is doing well. The feed profit for both sow farming and fattening pig farming is well above the long-term average. This is evident from the latest quarterly report from Rabobank. However, the high prices are putting pressure on Europe's competitive position internationally.
Rabobank expects prices to come under pressure in the coming quarter. This is due to the seasonal decline in the demand for pork. In the field of raw materials, according to the report, a dichotomy is visible. For example, prices for grain will rise, while soy prices will fall.
Looking back at the previous report
In the second quarter of 2017, pig prices were also above average. The main reasons for this were the tight stocks and the strong demand for pork.
Due to an increase in production in the US, more meat from that country entered the world market. As a result, the European competitive position on the world market came under pressure. Partly because of this, total European exports fell by 2,8% between January and April. European exports to China and Hong Kong even fell by 15%. As the largest exporter to China, the EU saw its share fall from 72% to 65% of the total volume.
What does the second half of 2017 look like?
Rabobank expects meat prices to fall. This is due to the seasonal pattern. The current fall in prices is the result of the start of the summer period, which causes meat consumption to fall.
For 2018 and 2019, the self-sufficiency rate in Europe is expected to increase further, which could lead to price pressure. The expectations for the first half of 2018 are positive, after which the average price level is expected to move towards the average feed profit. The level of exports to third countries is an uncertain factor in this regard.
Meat consumption is under pressure
Pork consumption is under pressure as a result of changing consumer eating habits. The social debate also plays a role. This is reinforced by the higher pig prices. Current pig prices are 10% higher than the five-year average, while poultry and beef prices are at the level of the five-year average. The high fattening pig price is expected to lead to a further decline in pork consumption in Europe.
Japan offers opportunities
De trade agreement which went into effect on July 6, 2017, represents an important opportunity for the pig industry to increase exports to Japan in the coming years. Japan is the second largest destination for European pork exports. The demand for pork in Japan is growing due to higher consumption and the decline in self-sufficiency. The potential growth of exports to Japan is being stimulated by a 5% to 10% reduction in import tariffs.
Raw material prices
Grain price forecast has been revised upwards as a lower global grain harvest is expected due to the dryness† The market forecast for maize remains unchanged. In the short term, price fluctuations may arise, as a crucial development phase is entering the northern hemisphere.
Prices for soybeans and flour continue to fall slightly. The reasons for this are the availability of beans and flour and the favorable growing conditions in the United States.
Based on current insights and market developments, the feed profit for sow farming is expected to be more than €350 (+70%) and for fattening pigs to be €15 (+20%) above the long-term average. This has a positive effect on the margins of the pig farmers.
Kimberly Baker
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