The reopening of the private storage aid scheme for pigmeat will be critical for further market support in the EU, according to the Rabobank Global Pork Quartetly Q1 report.
The private storage aid scheme for pigmeat closed after three weeks after volume limits in the scheme were reached.
The most recent information shows that the total quantity of product put into storage, most of it for a period of five months, was 89,841t at an estimated cost of €27.6m.
Due to the closing of the scheme, the EU pork market recovery experienced during the first weeks of 2016 will reverse in the coming weeks.
Meanwhile, the global pork market is to remain weak in the first quarter of 2016, however this will be followed by seasonal improvement, the report found.
Due to sufficient supply and modest demand development, the Rabobank five-nation hog price index will bottom out in the coming months, at the lowest point since 2006.
This is after a stronger-than-expected drop at the end of 2015, according to the report.
Looking at each of the other main pork producing regions, China’s market looks set to remain elevated.
In China, imports are expected to further increase, supported by strong domestic prices and further de-stocking of the herd in 2016, which Rabobank says is driven by stricter environmental regulations.
The Pork Quarterly Report found that the level of China’s imports and relative competitiveness of major exporters is a major dynamic in 2016.
US exports will determine price level
In the US, industry expansion is expected to slow after near-record supply growth in 2015, while packers’ margins will remain strong due to limited available capacity, according to the report.
Due to low prices, country of origin labelling repeal and re-listing of plants for export to China, Rabobank has says that exports are expected to pick up.
Brazil’s positive scenario will continue
In Brazil, the market is forecast to follow the steady path of the fourth quarter of 2015 due to continuing good domestic and export demand.
This will, however, not result in higher prices which Rabobank says is due to the challenging domestic economy and low international prices.