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6 Reasons Why China’s Falling Prices Will Impact Global Market


The price collapse in China surprised everyone, Rabobank analysts say in the company’s Pork Quarterly Q3 report. China’s hog prices sharply declined in the first quarter of 2021 to lower levels than imported pork prices, and prices have been below the break-even point of most fattening farms for over three months.


Rabobank says there are several reasons behind the price plunge. In the first four months of the year, new strains of African swine fever (ASF) outbreaks led to more herd liquidation in affected regions and caused a temporary supply surge.


“Based on MARA data monitoring, the monthly slaughter by scaled slaughterhouses increased by more than 35% in the first five months of 2021 and by over 40% in both April and May,” Rabobank analysts write. “This was followed by the dumping of oversized hogs as farmers abandoned hope of a price rebound and rushed heavy hogs to slaughter.”


The oversized hogs were up to 40% heavier than normal, which put extra pressure on supply from April to June. Combine this with disease outbreaks in late May and a new round of liquidation in those regions are likely to result in more market chaos.


China’s Hog Price Should Rebound in Q3, Analysts Say

Because of the large slaughter of hogs and liquidation of sows, Rabobank expects slaughter to decline in the third quarter as compared to the second quarter of this year.

“Average hog slaughter weight will also go down, as it’s not profitable to raise oversized hogs at the moment,” Rabobank says in the report. “While it’s difficult to predict how high the prices could move up, we believe live pig prices will likely go above CNY 20/kg but will be pressured by the high inventory of frozen pork accumulated in 1H by slaughterers and importers. Thus, the price rebound is expected to see volatility in 2H.”


Low local pork prices and low market sentiment provide even more uncertainty about domestic prices. As well, the severe floods in July create new disease risks for the remainder of 2021 and early 2022, analysts explain.


“The impact of record-breaking rainfalls on livestock production is still unclear, but Henan is one of the largest hog-producing provinces, so even if direct impact is limited, the indirect impact on crop quality, disease spread, and food safety is believed to be significant. This will increase uncertainty about the pace of production recovery in 2021,” Rabobank says.

Here are six reasons why global pork trade is facing big swings, according to the report. 1. Low Chinese imports expected in Q3. 2. Europe’s pork exports are highly dependent on China. 3. Price impact depends on the level of decline in exports. 4. Finding new export markets may mitigate the impact of China’s reduced import demand. 5. Weaker U.S. exports to China offset by stronger local demand, alternative export markets. 6. Lower Chinese demand is the main challenge for Brazilian exporters.


Par Jennifer Shike (24/08/2021)


Source : porkbusiness.com


Photo : canva.com (tirée de l'article original)

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