Trade policies, production levels and disease could influence market outcomes
Staff Writer
Farms.com
Across the world, members of the pork industry – including producers and processors – may want to prepare themselves for upcoming challenges and opportunities associated with market uncertainty.
Multiple factors are causing this uncertainty, according to a
quarterly report from Rabobank, a worldwide financial services provider.
For example, countries are still facing tensions about trade relationships.
“The potential escalation of the China/U.S. trade dispute – along with ongoing NAFTA modernisation talks – creates a heightened sense of risk,” Christine McCracken, senior analyst for animal protein with Rabobank, said in a company release.
In the U.S., producers might be wary of increasing production, as the potential trade war with China creates marketplace uncertainty.
“The impact of the current tariffs with China will … likely put pressure on the cutout – and ultimately hog prices – in the near term,” McCracken told Farms.com today.
However, the U.S. may redirect these whole muscle sales to other markets, she said.
Currently, the country ships about 25 percent of its offal through Hong Kong and could possibly transport additional product through the grey channel – such as selling through Hong Kong rather than directly to China – if that market is unaffected, she said.
However, China may “crack down on imports from Hong Kong,” McCracken said. “It is unclear how this will ultimately play out.”
The new version of NAFTA may affect the pork sector as well.
“Canada and Mexico are both important markets for pork and a change to trade terms could have significant implications for the industry,” she said.
However, until the governments release final details about the negotiations, the industry may have difficulty determining the specific effects, she explained.
The situation is slightly different in China.
In the short term, China’s tariffs on U.S. pork could help stabilize its oversupplied markets. However, this weight alone may not completely offset existing market pressures, the release said.
The country’s proposal to place tariffs on U.S. soybeans could cause additional stress.
While China will likely continue to see losses, world “demand for pork will remain good,” the release said.
So, the market may “gradually improve as the industry right-sizes production.”
In the European Union (EU), on the other hand, a main factor causing uncertainty is the threat of disease.
“We are watching the spread of African swine fever (ASF) in Europe and the potential implications (this could have on) EU pork exports,” McCracken told Farms.com. “Assuming any significant exporters (e.g. Germany) are affected, this could provide some upside for U.S. exports.”
In fact, Hungary reported its first case of ASF yesterday, she said.
Overall, the global pork industry may continue to face challenges.
“With so many threats, agility will be a key asset for pork producers in a volatile operating environment,” McCracken said in the release.
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