News Rabobank
Uncertain pig market, China the big influencer
These are uncertain times in the global pig market. In its fourth quarter update on 2020, Rabobank hinted that the coming months will mostly be filled with uncertainty.
Europe is under the spell of the African swine fever in Germany. This creates a surplus of pork on the European market, because China no longer buys German pork. In addition, the country is working hard to restore its own pig herd, which reduces the demand for foreign products. Rabobank foresees problems as a result of this now that global production has increased sharply as a result of the high demand for meat from China. Other sales channels must therefore be found.
German tumult penetrates deep
Although the ASF outbreak in Germany is limited in infected wild boars and does not affect pig farms, it has caused a lot of commotion in the market. China has imposed a ban, the European market has to absorb about 75.000 tons of German meat every month and German pig prices have fallen sharply. According to Rabobank, intra-European exports will remain possible for the foreseeable future, but other, alternative markets do not appear to be an option.
China, South Korea, Japan and Vietnam alone account for 76% of European pork exports, largely supplied by German production. With the disappearance of the top supplier, a major problem will lie on the European plate. In the short term, Germany could move to the Netherlands and Denmark, as Vion and Danish Crown have branches in Germany, although specific market standards in the Netherlands may limit the scaling up of export flows.
Given the limited freezing capacity in Europe and a surplus of German pork in the market, it is becoming increasingly difficult to respond to developments in the short term and to prevent things going wrong for pig farmers. Prices in Germany have fallen by 13% as a result of the AVP outbreak compared to before the outbreak. Rabobank expects recovery to take some time, given the limited alternative options to other export markets and its own demand being limited by the corona crisis.
Global Meat Plug
In the short term, Rabobank expects that other countries will be able to meet the export demand after the disappearance of Germany. In the long run, the bank believes that export demand will shrink as a result of more domestic supply in China. It is expected that the own population will only recover by 2024, but production will probably increase by 2021% in 10. According to Rabobank, this causes import demand to fall by 20 to 30%. Given the current global production and the limited alternative sales markets, it is almost inevitable that there will be a substantial surplus.
Production in countries such as Brazil and the United States is still increasing and the bank expects this to continue for some time to come. For 2021, the bank expects pork production in the EU27 and the United Kingdom to remain flat to slightly declining, depending on what happens with the import ban on German meat. Furthermore, the bank does not expect prices to recover to the level of 2019, partly due to the reconstruction of the Chinese pig sector.
Jorine Cosse
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