Global Disease Pressure Mounts, Opportunities Emerge for Pork Industry
Disease pressures continue to rise and cause problems for the global protein market. The severity of African swine fever (ASF) may be lessening in some areas, but the magnitude of the disease is growing globally. Rabobank analysts say opportunities are emerging from the risks the industry faces.
“The ramifications in 2020 will lead to continuous caution on production expansion in some regions and higher import demand on the global balance sheet,” say Rabobank analysts. “The ‘phase one’ trade deal will open up opportunities for U.S. exporters to increase shipments to China. In addition, several ongoing, regional trade-deal discussions will influence global trade flows.”
Rabobank analysts provided an overview of opportunities in key pork-producing regions in its first quarter report released last week.
China
The pace of ASF’s spread in China is slowing and analysts expect record imports in the year ahead. Government leaders continue to encourage restocking and production expansion. Because restocking is typically achieved by keeping gilts, Rabobank expects to see a further drop in local production in 2020, which will reduce overall pork production and boost import levels.
U.S.
Pork production in 2020 is expected to rise 3.2% year over year, analysts say. This production increase is driven by modest growth in the breeding herd and improvement in productivity. Although pork export demand will “remain robust” due to expected increasing shipments following the implementation of the trade agreements with China and Japan, analysts are concerned about labor.
“Labor shortages remain a key constraint in 2020, as increases in hog supplies continue to outpace packer capacity – an issue that faster packing line speeds could help to mitigate,” the report says.
Europe
Analysts expect a slower year for Europe on the heels of an estimated slight decline in 2019. EU pork production is forecast to increase by about 1% in 2020 due to high prices and strong export demand. The Brexit trade-deal negotiation, U.S.-China trade tensions and ASF will continue to cause EU production and trade uncertainties in the year ahead, analysts say.
Brazil
ASF’s impact on global pork production will raise international export opportunities in Brazil. In addition, domestic demand in Brazil is growing alongside ongoing economic reforms.
“With feed costs expected to remain reasonable and price levels expected to remain high, margins along the production chain will be well supported in 2020,” the report says.
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