January 27, 2012 - According to agribusiness research firm Rabobank International, stronger margins are ahead for the global pork industry in 2012, while Canadian pork production is expected to be flat to slightly up.
In its first quarter 2012 report, Rabobank said Canadian hog farmers, like pork producers anywhere, face high and volatile input prices and have shown a consequent reluctance to expand. Canada's sow herd has stabilized at about 1.3 million head and Rabobank said it expects it to remain near this level for the foreseeable future.
Rabobank also expects Canadian pork exports to be flat this year. Exports in 2011 benefited from increased volumes to China, South Korea and Russia, but were offset by reduced exports to Japan, Hong Kong and the U.S.
Canada's pork trade surplus with the U.S. was especially hard hit last year, according to the report. U.S. pork exports were up 18 per cent year-on-year through October, while Canada's exports to the U.S. over the same period dropped 10 per cent, due in part to a strong Canadian dollar and country of origin labelling (COOL) in the U.S. In November last year the World Trade Organization (WTO) ruled that the COOL policy violates the U.S.'s WTO obligations, ruling in favour of a challenge from Canada and Mexico.
Rabobank called the Canadian pork industry heavily export dependent, as last year 65 per cent of Canada's pork production was sent to foreign markets.
Disease will continue to influence the global market, as there continues to be clear signs of foot-and-mouth disease in China and African swine fever in Russia, the report said.
The report also noted that flat to slightly increasing feed prices will offer a welcome break to the industry.
Rabobank called Europe a wild card in the global pork outlook. Strong exports supported by a weakening euro relative to the U.S. dollar are expected to tighten pork supplies in the EU. However, the effect of the ongoing credit crisis on European GDP growth hangs over the market and puts a ceiling on pricing.
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