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Rabobank Sees Global Pork Output Drop in 2013 on Feed Costs

Global pork production is likely to decline into 2013 as high feed costs spur farmers to liquidate herds, Rabobank International said.

Global pork prices face “possible downward pressure” in the next few months while farmers slaughter animals to stem losses, Rabobank analysts including David Nelson said today in an e-mailed report. Ultimately lower supplies will lead to a rebound next year, and strong demand in China, the world’s biggest consumer of the meat, also will be supportive, the bank said. Feed prices “will remain elevated until at least mid-2013,” Nelson wrote.

“Prospects for the global pork industry’s performance are not bright due to the impact of rapidly increasing rising feed costs on production,” Nelson wrote. “Hog producers’ hedge positions, their ability to source feed, and their liquidity will be differentiating factors going forward.”

Benchmark global corn prices have surged 56 percent since mid-June on the Chicago Board of Trade as the worst U.S. drought since 1956 damaged crops. Corn touched a record $8 a bushel on July 23, while soybean meal rallied to a record $509.80 per 2,000 pounds on the same day. Both are used in livestock feed.

Chinese pork demand may post a “strong recovery” in the fourth quarter as supplies tighten, Nelson wrote. Canada’s pork industry may have a competitive advantage into 2013 because it is expected to have a “relatively good grain harvest,” Nelson wrote.

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