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EU-27 - Livestock and Products Semi-Annual 2010

by 5m Editor
9 March 2010, at 12:00am

According to the latest GAIN Report from USDA Foreign Agricultural Service (FAS), Classical Swine Fever (CSF) has retreated to most Eastern Member States and is largely under control in wild boar populations.

Executive Summary

As a consequence of the financial crisis, the restructuring of the intensive pig sector continued in 2009. Restructuring implied termination of the most inefficient farms throughout the EU and reduction of backyard farming in mainly the New Member States (NMS). It is expected that the swine cycle, expressed as piglet production, will bottom out in 2010. This upturn is based on the assumption that the current piglet supply is insufficient to fulfill the domestic and export demand for pork.

This year, domestic consumption is forecast to decline only marginally, while the demand for EU pork in Russia and China is anticipated to rebound. EU pork exporters believe that the firm economic growth will further elevate pork consumption in these markets. At present, the supply of competitive pork exporters to the Russian market has been cut off. Another factor is the termination of EU trade of slaughter hogs exports to Russia, which will probably reduce Russian slaughter and pork production. On the longer term, through 2010 and later, the EU is also expected to receive increased access to the Chinese market.

2009 & 2010: the swine cycle is expected to bottom out in 2010

The EU pig crop declined significantly in 2008. One of the main factors for this decline was the high feed price between July 2007 and January 2009, which affected profitability.

In 2009, feed costs were reduced. These benefitted the fattening margins, but the financial crisis pressed carcass prices under the five-year average and as a result, fattening margins remained tight. As a consequence, the restructuring of the intensive pig sector continued. Restructuring implied termination of the most inefficient farms throughout the EU and a reduction in backyard farming, in mainly the NMS. Spain and Poland accounted for almost half of the total EU cut back in piglet production. It is expected that the swine cycle, expressed as piglet production, will bottom out in 2010. Due to a recovery in mainly the UK and Denmark, annual EU piglet production is actually expected to increase by 0.6 per cent to about 256 million piglets. This upturn is based on the assumption that the current piglet supply is insufficient to fulfill the domestic and export demand for pork. This year, domestic consumption is forecast to decline only marginally, while the import demand for EU pork in Russia and China is expected to rebound.

In contrast to what was expected in the Annual Report, piglet production is not anticipated to recover in the NMS in 2010. During 2009, the import of piglets by the NMS, from mainly the Netherlands and Denmark, further increased. This trend is expected to continue this year. Another adjustment is the lower than anticipated swine export in 2010. Due to the new customs union of Russia, Belarus and Kazakhstan, import duties on live pigs were raised from five to 40 per cent. As a result, the trade of about one million slaughter hogs to Russia has been cut off. These animals are expected to be slaughtered on the EU domestic market, which increased the 2010 slaughter number from the forecast in the Annual Report. After the cutback of the EU pig stock in 2008 (-4.2 per cent) and 2009 (-2.7 per cent), the stock is forecast to only decrease slightly by 0.3 per cent to 148.5 million head in 2010.



EU disease situation

Classical Swine Fever (CSF) has retreated to the most easterly Member States and is largely under control in wild boar populations. In Romania, the first FVO inspection visit concerning this disease took place in mid-January 2010. If a CSF outbreak were to occur in the coming months, the stamping-out policy would be applied in the affected area. If no major outbreaks occur, Romania will potentially gain the status of CSF-free country before the second half of 2010. In the EU, Food and Mouth Disease appears to be under control. The EU Animal Health Plan for 2010 provides funding for continued monitoring and combating of these and other major livestock diseases.

Pork

2009 & 2010 Exports are forecast to recover in 2010

The elevated supply of pork in 2007, in combination with EC export funding, boosted EU pork exports in 2008, to a record level of 1.7 million metric tons (MMT). Exports increased most significantly to Eastern Europe and China/Hong Kong.

The export refunds were terminated on 8 August 2008. During 2009, EU pork exports to Eastern Europe and Asia plummeted, mainly due to the economic recession. Other factors were the lower domestic supply, and absence of EC export refunds. Exports to Russia were also restricted due to veterinary issues (see Policy section). The 2009 and 2010 export volume has, however, been revised upwards from the forecasts in the Annual Report.

Pork consumption is revised to a lower level accordingly. This revision is due to the graduate recovery of the trade through the year.

In addition, 2010 EU pork exports are expected to benefit from the economic growth, and thus demand for pork, in Russia and China. While Danish sector sources expect their 2010 export volume to remain stable, German and Dutch sector sources anticipate EU access to in particular Russia to improve on the short term. At present, the supply of competitive pork exporters to the Russian market has been cut off. Another factor is the termination of EU trade of slaughter hogs exports to Russia (see Swine section), which will probably press Russian slaughter and pork production. According to industry sources, the limited number of plants still blocked by Russian authorities has no effect on the export capacity of the EU. EU pork exports to Russia have been growing steadily since the low point at the beginning of 2009. Over the longer term, the EU is also expected to receive increased access to the Chinese market. While Denmark, France and Spain already export directly to China, the Netherlands is likely to receive eligibility beginning of 2010. Even if China reaches self-sufficiency, import demand for pork by-products is expected to grow.

As the swine cycle is expected to bottom out in 2010, the cut-down in EU pork production is forecast to be limited in that year: by only about 0.3 per cent to 22.0 MMT. Production of pork is anticipated to increase significantly in Germany and the UK. The German production expansion is mainly based on piglets and slaughter hogs sourced from Denmark and the Netherlands. German slaughter numbers have increased steadily since 2000 and are currently nearly a quarter of total EU slaughter. In the UK, the low Sterling / Euro exchange rate benefited profitability to which farmers responded by increasing sow stocks. In the NMS, the first signs of recovery are reflected in the expansion of commercial slaughter.

Due to restricted consumer budgets, pork consumption is expected to decline in the NMS. In north-western Europe, an important factor for the stagnating pork consumption is the increasing popularity of poultry meat. In this market, the financial crisis has only a limited effect on total pork consumption, except the trend of consumers shifting from buying expensive parts to the cheaper parts.

Veterinary problems with EU exports to Russia

EU meat exports to Russia, especially pork, were severely hampered in 2009, as Russia implemented stricter hygiene and residue standards. However, towards the end of 2009, most EU exporters were relisted for exports to Russia, after the EU agreed to meet the stricter standards, and processors implemented these. However, in the longer term, these exports are uncertain as Russia is systematically decreasing meat import quota from year to year and is publicly aiming to reach self-sufficiency in 2012 or thereabouts.

Further Reading

- You can view the full report by clicking here.

March 2010