Rabobank: 'Have a buffer for the next price drop'

Thanks to good pig prices, 2017 is an above-average year for Dutch pig farming. Whether prices will remain good in 2018 is not certain. That is why Rabobank is calling for buffers to be built in order to bridge a new price trough.

Rabobank signals that exports to China have fallen sharply (-30%). This is partly due to the improving euro and partly due to the high pig price in Europe. Internal market developments in China are also a cause of the decline. On the other hand, there is increasing sales to other Asian countries (Japan, the Philippines, South Korea) and the United States (US). On balance, however, European exports fell in the first 7 months of this year.

The pig market has changed course since mid-June. The rapidly falling pig and piglet prices are putting current margins under pressure. Thanks to the good earnings in the first half of the year, the feed profit for sows, up to and including September, is €575 above the long-term average of €509. For fattening pigs, the feed profit is smaller and is €5 above the long-term average of €76. According to Rabobank, this year's price peak can be seen as a 'loan from the market'.

Warmer expectations for 2018
Rabobank foresees competition from the US for 2018. The slaughter capacity there has increased considerably, which currently results in approximately 2,5 million slaughters per month. U.S. pork production is expected to continue rising through 2025. This is partly due to the increasing productivity of sows. Production there is falling faster than consumption, making the US more dominant in the world market.

Rabobank expects Chinese pork production to increase by 2018% in 2. This while it Chinese Ministry of Agriculture talk about shrinkage. The reason why China imports less pork is the sharp fall (-17%) in the Chinese pig price, while international prices increased.

Rabobank also expects additional production in Europe. The reason is the growing sow herd that has increased by 1,2% this year. As consumption falls slightly and the euro gradually strengthens against the dollar, the self-sufficiency rate in Europe is increasing. This could lead to further price drops. Rabobank expects 2018 to be an average feed profit year.

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Ruud Huirne, director of Food & Agri at Rabobank, will National Economic Agriculture Congress on 30 November in Bunnik (Utrecht) discuss trends in agriculture. Click here for more information.

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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