The increased production capacity in certain parts of the EU and continued low feed prices resulted in an increase in pigmeat production in 2015, despite the Russian import ban, putting pressure on prices.

Due to the time-lag before pig production adjusts to these price developments and short-term economic behaviour to cover at least partly the investment costs, slaughterings stabilised in 2016, following the reduction in reproductive herd, as observed in the December 2015 and June 2016 livestock surveys.

Environmental and social concerns, which have led among other things to national and subnational
legislation on various aspects of manure management, will probably limit expansion of production in the current hotspots without bringing it to a halt. A possible way out, as already seen in Denmark, is to specialise in piglet production while pigs are fattened in other regions of the EU. Another option observed at more regional level is to treat and transport manure to what are called ‘N-deficit areas’.

Trade-offs between higher production and logistical costs on the one hand and opportunity costs of
delocalising on the other, including the feed and processing chain, will play an important role in
decisions on new investments. Another way to cope with decreasing margins or to increase
competitiveness is vertical integration, as observed in Spain and northern Italy. Changes in EU
consumption patterns may limit domestic demand but world import demand is still increasing, giving
way to additional exports. Taking into account these elements, EU pigmeat production is expected to grow slowly in both the EU-15 and the EU-N13, by 300 000 t over 10 years.

World demand to support EU exports

Due to a boost in Chinese pigmeat demand on the international market in 2016, EU exports have hit a record level, slowing down the foreseen readjustment in EU production and even resulting in
an erosion of EU consumption. According to the Chinese agricultural outlook, a significant yearly
import demand for pigmeat is projected to continue over the medium term but at a lower level, as seen today (close to 900 000 t by 2026). World import demand for pigmeat is expected to remain strong, but to grow more slowly than in the previous decade (+1.2 million t), reaching 8.5 million t by 2026, mostly from existing EU trade partners in Asia and sub-Saharan Africa.

Although it is assumed that Russia will continue to ban imports of pig products for sanitary and
economic reasons until the end of 2017, the country’s ambitious self-sufficiency targets and the
decreased purchasing power will lead in any case to lower imports from the EU after the ban is assumed to be lifted.

In addition, in order to secure supply in the absence of banned EU and US meat, Russia has been looking for other suppliers, some of whose exports it had previously restricted. Moreover, EU volumes that under normal market conditions would have gone to Russia have found their way to other destinations, mainly Japan, South Korea, the Balkan countries and the Philippines.

Driven by consumption developments, the Philippines, a market with over 100 million consumers, imported 190 000 t from the EU in 2015.

Imports are expected to continue at this level. The USA, the EU’s main competitor on the world market, has recovered from the 2013 outbreak of porcine epidemic diarrhoea virus (PEDv) and gradually increased its pigmeat supply, competing directly with the EU on the South Korean market. US pigmeat exports are likely to return to growth over the outlook period at competitive prices, encouraged by a weaker USD. They are expected to increase market share slightly while the EU's share remains stable.

In view of the above, EU exports are expected to reach around 2.8 million t at the end of the outlook
period. This also reflects the EU pig market's increasing dependency on exports, which are expected to go from less than 9 % to 12 % by 2026.

Consumption levels going in opposite directions

Per capita pigmeat consumption experienced an enormous boost in 2014 and 2015, especially in the
EU-N13, gaining 3.6 kg in 2 years and bringing total EU consumption back to pre-crisis levels. In 2016, EU consumption decreased, mainly due to lower availability of pigmeat on the domestic market. In the longer run, consumption in the EU-15 will start to fall again slowly to 31.2 kg per capita by 2026, as pigmeat loses out to poultry meat, but total consumption in the EU-15 will increase due to population growth (+150 000 t). Consumption in the EU-N13, on the other hand, is expected to increase gradually, to reach a record high of 34.5 kg per capita by 2026, driven mainly by growing demand in Poland and Romania.

Thanks to the strong import demand from China among others, pigmeat prices went up again in 2016 after 2 years of lower prices. EU prices are expected to strengthen only slowly over the outlook period, due to sustained price competition with the Americas (USA, Brazil). Prices are predicted to reach an average of 1 670 EUR/t in 2026. Uncertainties relating to the macroeconomic environment and to changes in yields could, however, see pigmeat prices fluctuating between 1 300 and 2 160 EUR/t.

Further Reading

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