UTRECHT, THE NETHERLANDS – Global pork prices moved sharply lower as the recovery of production has outpaced demand, Rabobank said in its Pork Quarterly Q4 report.
Analysts stated that improved herd health and reduction in African swine fever (ASF) impacts are two reasons prices stabilized but remained well below the peak.
“Pork prices are also lower seasonally yet remain heavily dependent on pandemic restrictions and macroeconomic trends,” according to the report. “Labor constraints in some markets and cost inflation will pressure production margins and could also slow herd growth.”
Pork production in the United States is expected to recover despite the beforementioned rising costs and labor constraints. US hog prices in October were down sharply from the highs in the summer but remain 21% above 2020 levels.
The report said domestic demand is expected to slow as higher costs are passed through to consumers even with pork exports staying high.
In the Chinese market, producers responded to rising costs and the continued threat of ASF outbreaks by reducing the herd, which drove hog prices to new lows and forced high-cost producers to exit.
“Demand remains weak, limited by pandemic dining restrictions,” according to the report. “In response to this slowdown, China continues to limit imports in an effort to balance supply. Given ongoing demand weakness, Rabobank expects pork supplies to remain ample following herd reduction and previous restocking, but supplies could be short of needs should economic trends improve.”
Pork production in the European Union saw hog prices go 24% below the five-year average. Analysts said this happened due to larger slaughter and weaker demand in both domestic and export markets. Rabobank also expects German and Dutch producers to liquidate their herds and reduce production in the coming months. The European markets are also facing labor challenges at some plants, but the impact is not widespread.
Brazilian pork production is expected to increase 5.5% year-over-year with additional growth in 2022, Rabobank said. The country’s pork sales remain strong and are being helped by weakness in the Brazilian real and larger pork supplies.