EU pig herd expansion needs to “stop or decline” to support prices

Supply discipline is going to be key to the performance of the global pork market next year, warns today’s quarterly pork report from Rabobank.

“Prospects for 2017 are weak, with global trade expected to stabilise and with all the main producers in expansion mode,” said Rabobank’s animal protein analyst, Albert Vernooij, adding that this will make supply discipline key to the industry securing positive prospects next year.

As for production in the EU, Mr Vernooij (pictured above) added that herd expansion would need to “stop or decline” next year in order to support prices.

The EU’s 2017 prospects are soft, he warned, highlighting rising competition in Asia and the declining value of Sterling as key factors which are “pressuring returns” in the European market.

Rabobank’s summary view of the US market is that “higher-than-expected” supplies, combined with stalling exports and rising domestic competition from beef and poultry, are pushing both pig prices and industry profitability down.

“For pig producers, this situation will worsen in Q4, 2016, with slaughter capacity constraints putting processors in the driving seat until new capacity arrives in 2017,” stated the bank.

The headline view on China, meanwhile, is that low production and seasonal demand towards the Chinese New Year will support prices, after a Q3, 2016, dip in values, and that this will assist ongoing strong import volumes.

Growth in market demand in China is expected to be “slower” than previous months, however, with competition continuing to intensify as more countries and companies obtain export permits.

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