'Growth of China's pig population will depress the meat market'

Growth in China was severely hampered last winter by new outbreaks of African swine fever (ASF), Rabobank reports in its quarterly update. As a result, China's import needs will remain at a high level for the time being. However, it will probably decrease slightly in the course of the year.

In the United States, too, health problems in the pig herd resulted in lower production than previously thought. Taking all factors together, Rabobank has revised downwards the expected growth in global pork production for this year. In the previous quarter, the bank still assumed production growth of 4,3%, now it is 3,4%. The disappointing production figures are an international stimulus for pigs and meat prices.

European Union production has grown
In 2020, total pork production in the European Union (including the United Kingdom) grew by 1,3% compared to 2019. The growth was particularly strong in Spain (+9%) and Denmark (+6%). 1% more pork was produced in the Netherlands. A contraction was noted in Germany (-2%) and Italy (-12%).

A slight growth in European production is also expected for the coming quarter compared to the second quarter of 2020. This is partly due to the first problems in the slaughter and meat processing industry due to corona in the second quarter of 2020. This had a depressing effect on production in that quarter. In Germany, production in the second quarter is also likely to be lower. German pig farmers had less need to import piglets. This is due to the poor market prospects. German meat exporters are still facing export restrictions introduced after the discovery of African swine fever in the country. 

The European Union (including the United Kingdom) is currently 121% self-sufficient in pork. It now exports about 5,1 million tons annually. In 2020, about 65% of this was destined for the Chinese market. Spain was the main supplier and good for an export of 1,3 million tons to China. Rabobank therefore calls the dependence on European exports to China high and warns that the supply of pork on the world market will increase in the coming years. According to the bank, it is certain that the pressure on the meat market within Europe will therefore increase.

Imports from China will decrease slightly this year
Despite the fact that China's total import demand reached new record highs in the first months of the year, Rabobank expects volumes to decline slightly in the course of the year. This is partly due to the growth of the pig population, but also because the prices for (pork) meat in China are currently declining. Prices in exporting countries and regions such as the United States and the European Union, on the other hand, have risen sharply. This is gradually making imported pork products less attractive in terms of price.

Reasonable returns for many producers
Despite the sharp rise in feed prices worldwide, Rabobank expects that most pig producers will be able to operate with a positive return this year. The bank therefore speaks of 'lucky' that last year, for various reasons, production did not increase as much as previously expected. As a result, there is a nice balance between supply and demand for producers, so that despite the highest feed costs, production can still be produced with efficiency in 8 years.