Consumer pork demand has suffered a near-term shock due to global quarantine measures, while the production and packing sectors struggle with supply chain disruption, according to Rabobank’s latest Pork Quarterly titled ‘Covid-19 Crisis Disrupts Global Pork Industry.’
Rabobank expects continued volatility in pork prices in 2020, as disruption in local markets is balanced with product shortfalls in Asia. “The combined effect of near-term demand destruction and processing interruptions due to labor constraints has weakened producer returns and will slow production growth. Weaker GDP growth could further pressure pork demand, compounding an already challenging operating environment,” according to Christine McCracken, Senior Animal Protein Analyst.
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Other highlights from the Pork Quarterly Q2 2020 include:
China: Hog price strength reflects slow herd recovery and demand recovery
Hog prices remain elevated on African swine fever (ASF) herd losses and a gradual recovery in the production sector. Producer interest in rebuilding remains good, resulting in a sharp upward trend in piglet costs. Continued outbreaks of ASF remain a concern and limit growth for smaller operations. Pork demand has recovered, albeit more slowly than anticipated.
Europe: ASF and Covid-19 production issues and strong exports deliver a volatile outlook
Asian demand drove a 25% YOY increase in exports, helping offset Covid-19 disruption. Two cases of ASF at commercial barns in Poland on the border with Germany raise new concerns.
US: Plant closures and weak foodservice demand drive sharp market downturn
Two plant closures and critical labor shortages at many others created uncertainty and forced a 35% drop in hog prices in recent weeks. This has created a backlog of hogs, which will quickly reach critical levels given record supplies. Pork values have dropped but have seen some support from exports
Brazil: Exports continue at a strong pace
Despite Covid-19 disruption, pork exports remain strong, driven by demand from China. Weakness in the BRL and a shortfall in supply in Asia will support continued growth, helping to offset weaker domestic markets. Producers face higher corn costs, which should limit production.