Rabobank Pork Quarterly Q3 2021: Looking for Growth Amid Uncertainties


Great volatility in Chinese hog and pork prices is rippling through the global market. China’s slaughter rates were unexpectedly high in Q2, pushing pork production up 35.9% YOY in 1H, according to official data. The sudden supply increase resulted in a sharp price decline and negative results in both farming and trading in 1H, pointing to low pork imports into China in Q3. While we expect hog and pork prices to rebound in Q3, the estimated high frozen pork inventory will impose a lot of downward pressure on prices. We expect the slowdown of imports in the coming months will reduce full year imports from 2020’s record levels by 10% to 20%. This will lead to a redistribution of pork trade in the global market and could place downward pressure on pork prices in exporting regions.

These are the main highlights:

China’s pork production showed strong growth in 1H, due to liquidation and oversized hogs. ASF continues to spread, causing ongoing liquidation in specific regions. Demand growth lags behind supply growth, reflected by the sharp fall in prices. Restocking has slowed, as farmers suffered sizable losses. Due to the liquidation of sows in 1H, we expect slaughter in Q3 to slow and prices to rise. However, the high frozen pork inventory will limit price movements.
Europe: Europe registered strong production growth of 5% YOY in the first four months of 2021, due to a backlog in slaughter at the end of 2020 and higher slaughter weights. However, high feed costs and softening exports will limit production growth in Q3. Exports to China were down slightly in April, offset by strong shipments to Vietnam and the Philippines. New ASF outbreaks in German domestic pig farms add new risks.
US: After reaching record highs in mid-June, hog prices are lower, stabilizing on strong demand and lower production. Disease loss, lighter slaughter weights, and high feed costs will moderate production in 2H 2021. Pork prices remain well ahead of expectations on strong belly and ham demand. Exports declined slightly through May, with weaker sales to China outweighing increases to Mexico, Canada, and Japan.
Brazil: Pork production started the year at a good pace, due to 2020’s positive results (mainly in exports). However, high feed costs will discourage further production growth in the coming months in some regions. In terms of demand, the atypical increase in beef prices in the first months of 2021 following dry climatic conditions has favored the consumption of chicken and pork.