Disease pressures affect global animal protein in two ways. Severe disease outbreaks can lead to local production losses, especially in cases where there is no cure, no vaccine, or limited vaccine stocks for the disease. This impact can last for some time – in the case of ASF in China, infected zones are prohibited from restocking animals for at least six months. The second area of impact is trade – and this is arguably more significant than production losses. The outbreak of disease brings restrictions on trade from the affected country, in order to manage the risks of the disease spreading.
The ongoing US-China trade talks add uncertainty to the international trade dynamics – will US pork be shipped to China without retaliatory tariffs in 2019? – as do Brexit and the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The Rabobank Five-Nation Hog Price Index dropped below the average 2015-2017 level, reflecting market sentiment.
Other higlights from the Pork Quarterly Q1 2019 include:
China: ASF spreading fast
Entering 2019, ASF outbreaks on large, modern farms have astonished the market. ASF is reshaping the industry. Production expansion and replenishment are expected to markedly slow due to great concerns over biosecurity measures. While pork supply is believed to be sufficient in Q1, the big supply issue will arise later in the year, with pork imports expected to increase substantially due to local supply shortages.
EU: Relatively stable despite the threat of ASF
The EU pork market has mixed signals entering 2019. While the expected higher imports by China encourage production expansion, Belgium and eastern Europe are still shrouded in ASF threats. Rising piglet prices in recent months signal tight piglet supply, but also strong production intentions. Brexit is another wild card for EU trade which is expected to play out in Q2 and beyond.
US: Continued production growth in 2019
Pork production is expected to rise 4% in 2019, driven by a large breeding herd and widely held expectations of stronger demand from China. While pork exports fell in some markets in 2018, overall exports managed to grow marginally, driven by strong shipments to Japan and South Korea. Exports are expected to improve in 2019, despite the uncertainty of the US-China trade talks. Hog prices continue to be strong, supported by improved export access.
Brazil: Better results expected in 2019
After experiencing a bumpy and challenging 2018, Brazil’s pork industry has more promising prospects in 2019. China is expected to drive export growth. The recent return to the Russian market – through recertification of a limited number of plants – will also contribute to rising exports. Local demand has the potential to improve further due to the more positive economic landscape.
January 2019/ Rabobank/ Netherlands.