Rabobank Animal Protein Analyst Eva Gocsik says their analysis shows that decreased international tourist activity will have a limited impact on total pork consumption in these countries. For the full year of 2020, we expect a decrease in total pork consumption of about 6% in Spain and 2% in Italy due to reduced demand in foodservice and retail. Furthermore, pork exports to Italy from major exporters, such as Germany, Spain and Denmark, are expected to remain largely unaffected by the unconventional tourism season in 2020.

A Lost Summer for Tourism

Tourism is an important driver of the economy in Spain and Italy, representing 12% of total GDP in both countries. These countries are also considered the most popular travel destinations by international tourists. Based on the nights spent by non-residents at tourist accommodations, inbound tourism accounts for 64% in Spain and 50% in Italy compared to total tourism activity (see Figure 1).

As the spread of the coronavirus is slowly getting under control, it seems that travel to Southern Europe will be allowed for at least European tourists from the summer onwards. The period from June to September represents a major part of yearly international tourist activity, i.e. 49% in Spain and 58% in Italy, whereas Q4 accounts for 19% and 15%, respectively. Spain welcomes foreign tourists from July onwards, whereas Italy opened its borders for international visitors starting 3 June 2020. Inbound tourism will, however, still be hindered by recovering flights, reduced consumer confidence and a negative economic outlook, which will result in depressed tourist activity throughout 2020. We estimate that from June to September 2020, Spain and Italy will lose about 38% and 39% of their total yearly international tourist activity, respectively. Additionally, 8% of total annual international tourist activity in Spain and 4% in Italy will likely be lost in Q4.

Despite the Importance of Tourism, the Impact on Pork Consumption is Limited

The reduction in international visitor numbers will have implications for both retail and foodservice traffic, leading to a reduction in pork consumption (see Figure 2).

The loss in foodservice traffic is estimated at 8% in Spain and 5% in Italy (see Table 1). In retail, the loss amounts to 4% and 2% in Spain and Italy, respectively (see Table 1). The impact in foodservice and retail together translates into a decrease in consumption of 6% (63,000 metric tons) in Spain and 2% (22,000 metric tons) in Italy, considering total volume sales in 2019.

In Spain, the reduction in pork retail sales (44,000 metric tons) is estimated to be higher than in food service (19,000 metric tons), as the retail market for pork is much bigger than the foodservice market. In Italy, the contribution of international tourists to foodservice and food retail is lower than that in Spain, which results in a lower impact on pork consumption in Italy, both in foodservice and retail.

In Spain, the estimated decrease of 65,000 metric tons in total consumption is not the largest decline seen over the last 15 years. Domestic consumption declined by 222,000 metric tons in 2009 YOY and by 228,000 metric tons in 2019 YOY on increasing export demand. Given the current strong export opportunities for Spanish pork – intra- and extra-EU pork exports increased by 16% YOY (323,000 metric tons) in 2019 – exports can possibly compensate for the falling domestic demand in 2020. In Italy, the reduction of 22,000 metric tons in domestic consumption is considered limited, given that the year-on-year declines ranged from 12,000 to 200,000 metric tons over the last 15 years.

The limited impact can be explained by the fact that tourism and international tourists are responsible only for a part of the foodservice and retail traffic. The impact may even be lower if we consider that more Spanish and Italian people than usual will stay in their own country for the holidays, partly compensating for the reduction in international tourists.

Pork Exports to Italy Remain Largely Unaffected

Reduced foodservice consumption in Italy in the summer will indirectly impact countries, such as Germany, the Netherlands and Denmark, that are less exposed to tourism but largely involved in exports to Italy. In 2019, Italy was the main destination for Germany’s intra-EU pork exports, with a volume of 341,000 metric tons. Germany’s second-largest export flow went to the Netherlands (269,000 metric tons), which is also a country with significant pork exports to Italy (149,000 metric tons).

Our analysis of the export flows shows that ham is the main product exported to Italy. About 70% of the hams exported from Germany were destined for Italy, representing about 44% of total German pork exports to Italy. Ham accounted for a large deal of total Dutch pork exports to Italy, at 68%. Denmark is also primarily exporting ham, with hams representing 78% of total Danish pork exports to Italy (81,000 metric tons).

In 2019, Germany, the Netherlands and Denmark together exported 571,000 metric tons of pork to Italy. The demand loss for pork in 2020, estimated above for Italy (22,000 metric tons), would account for 4% of total exports of the three countries. Assuming ongoing trade access and the strength of import demand from Asia, these countries will likely be able to find alternative markets for the pork that might otherwise have been exported to Italy. Hence, we do not expect any major disruptions in exports from these countries as a consequence of fewer international tourists in Italy.