Global pork prices will be under pressure due to an abundant supply and looming slaughter capacity constraints in the US, according to the Rabobank Global Pork fourth quarterly report.
It also found that the situation will not be helped by slowing Chinese imports which have been quite strong for a number of months.
Competition in the market will increase further due to expansion and prices will remain under pressure, Albert Vernooij, an Animal Protein Analyst at Rabobank, said.
This will result in a further decline of the Rabobank Five-Nation Hog Price Index in Q4, which turned unexpectedly in Q3.
“Prospects for 2017 are weak, with global trade expected to stabilise and all main producers in expansion mode, making supply discipline key to the outlook."
Outlook for major markets
In China, low production levels and increased seasonal demand coming up to the Chinese New Year will support prices after the drop in the third quarter, the report found.
This demand is expected to support a strong on-going volume of imports, but growth is set to be slower than in previous months.
Meanwhile, competition within the Chinese market is set to intensify as more countries and companies obtain export permits.
Pig farmers in the EU need to cut back on herd expansion in order to support current prices, according to Rabobank.
Prices are expected to, at least, stabilise at elevated levels during the fourth quarter due to continued pressure on supply levels and a good export demand.
However, 2017 prospects are soft, which Rabobank attributes to rising competition in Asia and the current exchange rate between the euro and Sterling pressuring returns from an important local market.
In the US the report shows that hog prices and industry profitability are being pushed down due to higher-than-expected supply, combined with stalling exports and rising domestic competition from beef and poultry.
The situation is expected to worsen in the fourth quarter for hog producers in the US with slaughter capacity constraints set to put processors in the driving seat until new capacity arrives in 2017.
Meanwhile, a market recovery is expected in Brazil, driven by rising exports and declining feed costs.
Pork prices in the South American country are set to rebound in the fourth quarter due to a balanced supply coupled with rising exports.
Both production and exports will be supported in 2017 in Brazil due to an expected decline in feed costs, Rabobank said.