Page 35 - PORCUS Sep / Oct 2020
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Information supplied
by Bureau of Food and Agricultural Policy (BFAP)
Market overview
                                                                Market overview
   FAP Logo: Standard
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World prices have diverged in recent weeks. In China, recovering demand and constrained supply continue to support price gains, but in Germany, a positive ASF case resulted in reduced exports and consequent price declines.
The FAO pork price index, which represents an average view for major markets, declined in September.
In South Africa, pork prices remain on a steady upward trend, increasing consistently since June.
Lower slaughter volumes relative to the same time last year has been a factor supporting the recovery in prices
The combination of higher world prices and weak exchange rate continues to support higher feed product prices. In September 2020, maize prices traded 21% higher than September 2019 and soybean prices 38% higher than September 2019
In the case of maize, challenges with quality on a higher than normal share of deliveries has lent extra support to prices.
International Markets
Producer Prices
Feed Prices
The COVID-19 pandemic continues to impose signifi- cant uncertainty on global markets. While South Africa’s lockdown restrictions have been eased with the shift to level 1 on 20 September, many countries are entering another period of lockdown as fears of a second waive gain momentum.
In the latest World Economic Outlook released by the IMF, the global economy is projected to contract by 4.4% - marginally less than the contraction projected in June. Conversely, the recovery from 2021 onwards is projected to be slower, supported by expectations of prolonged social distancing measures. This recovery also faces signif- icant risks – one of which is a second wave of infections.
In South Africa, the IMF expects a contraction of 8% in 2020, followed by a recovery of 3% in 2021. The effect
of the economic constraints imposed in South Africa is already evident in meat consumption figures. Over the first half of 2020, pork consumption was 10.5% below the same period in 2019. Most of this decline was attributed to the earlier months of lockdown – with May reflecting the biggest year on year decline. As the economy con- tinued to open up, demand has also started to recover, supporting a consistent increase in prices over the past
3 months. At the same time however, prices of feed mate- rials have also increased.
Amongst the factors affecting both pork and feed material prices are the dynamics in global agricultural commodity markets. These have been affected by the pandemic and the extent of restrictions imposed to contain it, but many other factors also contributed. In
the case of pork, African Swine Fever (ASF) continues to affect prices in different parts of the work. Chinese prices recovered strongly as demand increased, as supply is still severely constrained following the herd reductions that occurred as a result of the disease. By contrast, German prices have declined sharply in recent weeks, after its first case of ASF was confirmed in September. This has also influenced global trade patterns, as China has moved to ban German imports. As one of the countries stepping up to supply China, Spanish prices have not declined to the same extent, trading largely sideways since June.
In the case of feed materials, the weather has added uncertainty on top of COVID-19 impacts. Early projections pointed to a record maize crop globally and a substantial year on year increase in soybean production. More recent projections have however been less bullish, particularly
in the USA following storm damage in IOWA. As a result, world prices have responded and since the end of Sep- tember, global maize prices have increased by 12%, and soybean prices by 5%.
While South Africa is expecting the second largest summer crop on record, the combination of higher world prices and weak exchange rate has increased export par- ity levels. Combined with strong local demand for maize as cash strapped consumer revert to more basic food staples, this has resulted in much higher feed material prices in 2020 than might normally have been expected in a surplus year.
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