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EU Near Record Pork Prices in 2012

2 October 2012, at 12:12pm

EU - The EU has seen record beef prices and near-record pork prices throughout most of 2012. According to Rabobank Food & Agribusiness Research and Advisory, similar price levels have not been seen in the EU since the severe disease outbreaks of bovine spongiform encephalopathy (BSE) in late 2000 and foot-and-mouth disease in early 2001.

Rabobank’s research suggests supply of both cattle and hogs will remain tight both in the EU and globally until at least 2013 and that this low production will lead to a continuation of elevated prices.

EU meat industry margins have been pressured in recent years due to its inability to fully pass on the rising pork and beef prices. With feed costs nearing 2008 records the main question is what EU beef and pork production and resulting prices will be in 2013 and 2014.

The January-September 2012 EU pork price averaged EUR 1.67 per kg carcass weight equivalent (cwe), EUR 0.20 above the 2004-2011 average. This resulted from the decline of 2.5 million head in the sow herd between 2006 and 2011, in turn caused by low profitability in recent years due to high feed costs and by high piglet prices (up an average of 25 per cent compared to Jan-Sept 2011 prices).

Rabobank predicts a further two per cent decline in pork production in 2014 as smaller producers of piglets are expected to cease production due to the EU sow stall ban. In addition, expansion at remaining producers will be hampered by the current high feed costs and an export demand that will remain strong.

Similarly, EU beef export demand surged since the end of 2010 after low global beef availability and the opening of the Turkish market for EU beef. The unexpected strong price upswing resulted in record beef prices, above EUR 4.0 per kg cwe since May 2012. Tight supplies are almost solely responsible for the ongoing strong price levels in 2012. Together with an international supply capacity that is expected to be further pressured, EU beef supply will remain very tight into at least 2014.