Lower feed costs are expected to boost farming expansion, while seasonal demand is anticipated to increase pork consumption in the second half of 2024. However, risks persist, including disease pressures and trade vulnerabilities, such as China's antidumping probe into EU pork imports, finds the latest RaboResearch global pork quarterly.
Here's a breakdown of the five key trends to watch as identified by the analysts:
Lower feed costs driving expansion
With ample global supplies of grains and oilseeds, feed prices are expected to remain low, benefiting pork producers. This environment is encouraging herd expansion and profitability.
Resilient consumer demand
Consumer demand for pork remains strong worldwide, supported by easing inflation, slower economic growth, and competitive pricing. Seasonal factors are expected to further boost consumption.
In addition, easing pork prices in the EU and weak prices in the US should support consumption in these regions, finds the outlook.
Regional variations
Supply and demand dynamics vary by region. China, Vietnam, and the Philippines may face tight pork supplies due to disease outbreaks, while the EU and US are likely to see modest increases in production.
Notably, sow herd recovery in the EU and China is progressing faster than expected: “Productivity gains will continue despite recurrent disease issues in some regions," explains Chenjun Pan, senior analyst, animal protein at RaboResearch.
Geopolitical risks and trade challenges
Geopolitical factors, like China’s antidumping probe into EU pork imports, are creating trade uncertainties. This probe could disrupt market flows and global supply chains. Moreover, the US-China trade war continues to influence market dynamics, with Brazil gaining a competitive edge.
“A suspension of EU exports or high tariffs could mean global pork trade flows are rerouted as China finds new origins and EU exports flow to other regions,” remarks Pan. “If EU exporters offer discounts to capture new markets, importing countries may need to support and protect local producers. Meanwhile, other exporting countries may find their traditional trade partners shift to cheaper EU pork products.”
Notably, the US-China trade war that started in 2018 has already altered global pork trade. The US lost competitiveness with China due to its higher tariffs, with Brazil as the largest beneficiary. The upcoming US presidential election could bring changes in US trade policy and uncertainty to global trade patterns over the coming years.
Focus on domestic production
In response to trade uncertainties, many governments are prioritizing domestic pork production to enhance self-sufficiency and reduce reliance on imports. This strategy helps mitigate risks associated with geopolitical tensions.
“Technology adoption enables productivity improvements and the scaling up of production in traditional importing countries. Thus, global trade could be trending toward more fragmentation rather than more concentration.”
What the analysts are monitoring in Q3 2024 and beyond:
- Sow herd replenishment: Slower replenishment could impact supply and profitability in 2025.
- La Niña's impact: The upcoming La Niña climate pattern may influence crop conditions and price forecasts, although the outlook remains favorable for lower feed prices.
- China’s antidumping probe: The outcome of China’s investigation into EU pork imports will be closely scrutinized, particularly concerning potential duties.
- Biosecurity concerns: Ongoing disease outbreaks in various regions highlight the importance of biosecurity measures.
- Global economic factors: Economic performance, interest rate cuts, and consumer confidence will significantly impact pork demand, market prices, and global trade dynamics.
