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Rabobank: Slow recovery of global pork market

After the rather disappointing development of global pork trade in this year’s 3rd quarter, the global pork market will continue its slow recovery into its 4th quarter.

According to the Rabobank Global Pork Quarterly Q4 report, the main driver of the limited growth in the global market last quarter were the adverse exchange rates, which limited global pork trade. The bank states that this resulted in a clearly visible mismatch between supply and demand across the globe, with elevated price levels in one group of countries and stable/pressured prices in the other countries.

Recovery contracted in July

Rabobank writes that the recovery of the global market in the second quarter contracted unexpectedly in July, followed by a slow recovery in the months thereafter. Depreciating currencies in main import markets pushed up prices of imported pork, which hampered import growth in the first part of the third quarter. This was largely compensated by rising Chinese imports in the second part of the quarter. Combined with the decline in domestic production in these countries, rising pork prices were the result.

Albert Vernooij, the bank's animal protein analyst, said: "The global pork market shows a clear mismatch between supply and demand across the globe, with elevated price levels in one group of countries and stable/pressured prices in the other countries."

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Growth in main exporting regions

The bank's report continued to say that supply growth in the main exporting regions (the US, EU and, to a lesser extent, Canada) was not able to reach the demanding markets in Asia. As a result, the Rabobank 5-nation hog price index declined into the third quarter, followed by some recovery towards the end of the quarter.

It is concluded that the global pork market will slowly improve towards the end of 2015 and into 2016. Trade is expected to continue to rise, but exchange rate developments will impact both the volumes and returns in key export markets.

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Growth size of pork production in importing countries

In the longer term, the main question is how large the growth of pork production will be in importing countries and how this will impact global pork trade. This is an issue, as herd developments in the exporting countries show that production is expected to increase further, Rabobank said.

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