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Decline in global output expected to result in stabilising of pork prices

Pork prices are expected to stabilise during 2013 due to a projected decline in global output, but input costs are also rising, according to the latest market analysis from Rabobank Food and Agri Research.

Rabobank’s Q3 report also projects that feed costs will remain elevated until at least mid-2013. And, while it also projects that a recent rise in sow culling and a series of other factors may create downward pressure on price in the next few months, this is likely to be followed by markedly stronger prices in the last quarter of this year.

The analysts expect greater on-farm production efficiencies will be needed to achieve profitability in the sector.

The report’s authors state: “Declining pork production into 2013 will result in a rebound in prices, but it remains to be seen if this is sufficient to cover the booming feed costs. Feed costs are projected to remain elevated until at least mid-2013.

“The primary risk to this view is further worsening of the economic crisis, which is already pressuring global GDP growth. A slowdown in high-growth Asian markets would limit import demand and price potential.

“It is clear that we have passed the ‘no margin for error’ feed supply situation.

“The drought can be seen as a major error, and the industry has entered into a situation where sufficient sourcing at any price is the primary concern for both farmers and processors.

“The goal is now to limit losses.”

One positive highlighted in the report is that Chinese imports of pork reached record levels during the first five months of 2012, running contrary to expectations.

This positive was also supported by good price levels in the US, EU and Canada.

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