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EU-25 Livestock and Products Annual 2006

by 5m Editor
7 August 2006, at 12:00am

By USDA, Foreign Agricultural Service - This article provides the pork industry data from the USDA FAS Livestock and Products Annual 2006 report for the EU-25. A link to the full report is also provided. The full report includes all the tabular data which we have omitted from this article.

Report Highlights

EU swine numbers increase in 2006, but are forecast to decrease by the end of 2007, as the pig cycle ends. Exports of pigs and piglets increase in 2006 but are forecast to decrease again in 2007. EU pig slaughter and pork production continue to increase in 2006 and through 2007. Pork imports are slowly increasing from the U.S. and Chili. EU pork exports continue increase. EU pork consumption increases further in 2006 and 2007.

EU dairy cattle herds continue to decrease. The EU beef cattle herd is forecast to reverse its decreasing trend into a marginal increase in 2007, as some dairy farmers turn to beef production. Cattle slaughter and beef production see a one-time increase in production in 2006, because of the end of the UK OTMS, which will allow about 500 thousand older cattle in the food chain again. EU beef imports are decreasing in 2006 as a result of FMD in Brazil and are forecast to increase in 2007. EU beef exports continue to decrease.

Executive Summary

Swine numbers in the EU are still increasing in 2006, but are forecast to start falling again in 2007 as the current pig production cycle moves to its end. As a result, exports of piglets, but also some pigs for slaughter, are expected to reach a maximum of 850 thousand pigs in 2006, after which they are forecast to decrease again in 2007. EU pig export destinations are in the Balkan countries, Romania and Ukraine mainly. Pig slaughter is increasing in 2006 and is forecast to still further increase in 2007.

EU pork production is increasing, in line with pig slaughter in 2006 and is forecast to further increase in 2007. EU pork imports are slowly increasing, albeit at a low level, from the U.S. and Chili. A new U.S. specific pork TRQ of 4,700 MT, as part of the U.S. compensation for lost markets upon EU enlargement, should allow U.S. exports to the EU to further increase.

EU pork exports are still increasing in 2006, despite high EU pork prices. However, EU pork exports to Russia are benefiting from the export problems in Brazil as a result of the FMD situation. EU pork exports in 2007 are forecast to marginally further increase. Pork consumption in the EU continues to increase, especially in the New Member States (NMS) as household incomes are increasing. This consumption increase is forecast to continue in 2007.

Swine: 2005

A review of swine numbers for 2005 showed little surprises. Final EU swine exports were lower than previously estimated, but still significantly higher than in 2004. Swine exports to Croatia almost doubled to 280 thousand head, while Ukraine imported about 150 thousand swine for the first time in more than five years.

Total EU swine slaughter ended about 0.5 million head or 0.2 percent lower than previously estimated. Slaughter was lower than estimated in Denmark, Germany and Poland, but this was partly offset by underestimation of slaughter in Hungary and the Czech Republic. Finally, the EU December census showed a much smaller increase in EU pig numbers than previously anticipated.

2006

The estimation for EU pig production in 2006 is slightly increased as a result of slightly higher sow fertility. Swine exports are expected to increase by more than 10 percent compared to 2005, as already in the period until April Russia has imported almost 100 thousand pigs, compared to only two thousand in 2005, while export of piglets to Croatia, Romania, Bulgaria, Serbia and Ukraine are also significantly higher. Exports to these destinations originate mostly in The Netherlands, Germany, Poland, Hungary, Denmark and Austria.

Intra EU trade of piglets between The Netherlands and Germany was disrupted by a German outbreak of Classical Swine Fever (CSF) at the beginning of March 20066. However, this CSF outbreak is not expected to change German pork production as it is anticipated that the piglets that were prevented to enter Germany, eventually will be imported as slaughter pigs and only a total of 92 thousand pigs were destroyed in Germany as a disease containment measure. Intra EU trade of pigs and piglets totals about 10 million head, with the Benelux and Denmark accounting for most of the net exports, followed by Ireland and France, while Germany is the largest net importer, followed at considerable distance by Italy, Portugal, Austria, Spain, the UK and Hungary.

A comparative German advantage in slaughter costs is at the origin of these large imports of pigs for slaughter. This advantage results from low labor costs, as a result of flexible contract labor, and large underused slaughter capacity. Total EU pig slaughter is expected to increase by some 1.5 percent compared to 2005, while the EC expects a 1 percent increase. The most significant increases in slaughter are expected in Poland, Spain, Germany, Italy and Portugal, while decreases in slaughter rate are being observed in Denmark, Hungary, the Benelux countries and the United Kingdom.

EU pig ending stocks are expected to further increase compared to 2005, but at an albeit slower pace than previously forecast as the pig production cycle approaches its end. Increases in ending inventories are mainly expected in Denmark, Germany and Spain. Greece is expecting a significant decrease in 2006 swine ending inventories as domestic swine are slaughtered to meet increased demand for pork to replace poultry meat as a consequence of the AI scare in Greece.

2007 forecast

EU pig production in 2007 is forecast to decrease by 550 thousand head or 0.2 percent, because the current pig production cycle is nearing its end in the most important producer countries. This is expected to result in some decrease in exports. EU pig slaughter is forecast to further increase in 2007, mainly in Germany and Denmark, and only partially offset by decreased slaughter in Poland, Hungary and Greece. EU 2007 ending inventories for swine is forecast to decrease by 0.5 percent in anticipation of the onset of a new pig production cycle.

Pork: 2005

An update of EU 2005 pork numbers resulted in minor decreases to production and consequently pork exports and domestic consumption.

2006

EU pork production in 2006 is expected to increase in line with increased slaughter expectations compared to 2005, but to a lower extent than previously forecast. Imports are expected to slightly increase, as imports from the U.S. and Chili to Germany are increasing. The new U.S. specific EU pork quota7, which was negotiated as a compensation for lost market access upon accession of the 10 NMS might also start enhancing U.S. exports to the EU. EU pork exports are expected to further increase, to Asia and Russia, despite record high EU pork prices.

Germany is an exception as a consequence of the CSF outbreak in March 2006. EU pork exports to Russia are anticipated to increase due to fading competition from Brazil as a result of FMD outbreaks. Because of strong competition from the U.S. and Canada, EU exports to Asian destinations, mainly Japan and South Korea are expected to decrease. Hence, the EC believes the Japanese Special Safeguard will not be triggered in 2006.

Domestic pork consumption in the EU is expected to increase, notably in Germany as a result of enhanced consumption related to the World Soccer tournament and some replacement of poultry because of AI scare, in Spain and to a lesser extent France to replace poultry as a result of the AI scare. Domestic consumption in the NMS is increasing because of increased household incomes. Pork producers in North Western Europe, mainly Germany, Denmark, and the Benelux, regard the NMS as a growth market until domestic production will recover.

2007 forecast

EU pork production in 2007 is forecast to further increase as a result of increased slaughter. Imports are expected to be stable again. EU pork exports are forecast to stabilize as competition on world pork markets is increasing. EU domestic consumption is forecast to further increase, mostly in the NMS. German domestic consumption should decrease slightly again as the World Soccer Cup was a temporary opportunity for increased pork consumption in 2006.

Policy

Consequences of the accession of Romania and Bulgaria
With the accession of Romania and Bulgaria, which is scheduled at the beginning of 2007 after a final evaluation by the European Council in October of 2006, some 5.1 million farms will be added to the 9.9 of the EU-25. More than 95 percent of farms in Romania and Bulgaria are smaller than 5 hectares and over 98 percent smaller than 10 hectares8 (BU50129 and RO501110). This will also mean the addition of some 30 million consumers to the existing 497 million in the EU-25.

Romania and Bulgaria will add some 3.5 million cattle to the EU’s 86.4 million11 or 4 percent, as well as 7.5 million pigs to the EU herd of 151.1 million12 or 5 percent. Romania and Bulgaria are net exporters of cattle and beef and net importers of swine and pork. Much of this trade was already with the EU and that is expected to largely increase upon accession. U.S. pork exporters are already loosing out on these markets, especially as Romania has already started implementing EU legislation, including for imports from third countries before accession (RO6005 - New Trade Regime for Poultry and Pork Products 13).

Consequences of an agreement in the Doha Round

Upon a agreement in the DOHA round on the terms of the European market access proposal, EU beef tariffs would be cut by 60 percent, while under the G20 market access proposal the cut would be 70 percent. Under the EU proposal, EU pork tariffs would be cut by 45 percent and under the G20 proposal by 55 percent.

In a situation where already now Brazilian quality beef was able to enter the EU at full tariff, any tariff cut will directly impact EU domestic prices. Even if the EC compensates EU beef producers for this loss through additional direct payments, which is highly unlikely because of the implications for the EU budget and the EU green box spending, the least competitive EU beef producers will be forced to stop cattle raising for beef.

The EC has calculated that this could lead to extra market opportunities for beef imports of up to 800 thousand MT under the EU proposal (February 2, 2006 speech by Commissioner Fischer-Boel “Getting the facts straight on the EU’s agriculture offer in the Doha round”14. It could probably be 1 million MT or more under the G20 proposal. Total EU beef imports could then surge to 1.5 million MT or about 18 percent of total EU beef consumption. Hence, the reason why obtaining sensitive product status for beef is a key priority for European beef producers. For different WTO proposals, see CRS report “WTO Doha Round: The Agricultural Negotiations.

Further Information

To read the full report please click here (PDF format)

List of Articles in this series

To view our complete list of 2006 Livestock and Products Annual reports, please click here

August 2006