Cheap Brazilian pork drags on global prices
Global pork export prices have been under continued pressure throughout 2018, with prices dropping steadily to a low of $2.42/kg by September.
This average price is based on export prices from the four major exporters; the EU, US, Canada and Brazil. The latest quote remains well below the corresponding time period in 2017, by $0.28/kg.
While all the key exporters have experienced downward price pressure this year, Brazilian pork has been particularly negatively affected. This fall will have been offset by a reduction in costs due to the continued depreciation of the Brazilian Real against the dollar. However, price cuts have also been necessary in local currency terms too, following Brazilian pork being banned from the Russian market at the end of 2017. Russia absorbed over 40% of Brazil’s pork exports last year, and so clearly lower prices have been required to help find a market for the displaced product.
At the same time, production has been increasing from the other key global exporters, adding to the volume of available exportable product. This is reflected in global export volumes, which have increased 1.5% in the year to September. However, it seems demand from importers has not been growing at the same pace as supply, contributing to the downward price pressure this year.
EU prices had been trending comfortably above the other global exporters, however in quarter three they fell sharply to sit in line with Canada and the US. This partly reflects some weakening of the euro against the dollar this spring, although prices have also fallen in euro terms. The presence of comparatively cheap Brazilian pork on the global market has weakened the competitiveness of EU pork, leading to lower prices.
Looking forward, there are some reasons to believe that global markets may now start to strengthen. There is potential for greater import demand from China on the back of ASF developments, and Russia partly reopening its market to Brazilian pork, should help support demand for Brazilian exports and perhaps stimulate prices there. However, time will tell the extent to which these opportunities arise, and how the market balances with increasing pork production still expected from the US, Canada and Brazil.
Bethan Wilkins, Analyst
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