Pork prices set to stay high, thanks to PEDv, claims Rabobank
Rabobank’s latest report said pork prices will "continue to break records" in the last quarter of the year, due to continued tight supply caused by the ongoing PEDv crisis.
"In the US, Mexico, Japan and South Korea, the countries that have been affected by PEDv, the key question will be ‘Where to source pork?’" said Rabobank analyst Albert Vernooij. "In these countries the supply drops, as well as declining feed costs, are expected to push farmers’ profitability into record territories. In contrast, processors’ margins will be pressured due to the strong competition for hogs."
China
Recovering prices in the course of Q3 will push Chinese farmers’ margins to positive territories, which will result in the bottoming out of the sow herd.
US
The US will see record hog prices and producer profitability in Q2 and the rest of 2014, while demand domestically and abroad remains robust.
EU
With lower levels of PEDv the EU is the only region that has enough pork available at "reasonable" prices, said Rabobank, with predictions for EU exports to Asia and the US remaining positive. Developments regarding the Russian ban on EU imports will be a determinant for prices with limited upside, so long as nothing changes, and strong if a partial opening occurs.
Japan
Record prices in Japan will continue, driven by strong supply pressure from PEDv-induced lower production and expensive imports resulting from the relatively cheap yen.
Higher import prices will also significantly affect South Korea and Mexico according to Rabobank. In Mexico, pork meat prices have increased by around 25% year-on-year and have the potential to increase by another 5%.
"With PEDv continuing to impact supply into 2015, prospects for the global pork industry remain positive. The main wildcard is keeping supply discipline, as many farmers will be tempted to expand production, driven by the low feed costs and high profitability," Vernooij concluded.
