Swine & Pork – The swine sector withstands the Russian ban

EU piglet production and slaughter for 2015 is forecast at a significant higher level than the official USDA estimates. The specialized breeding farms in Western Europe are anticipated to retain their production levels. But a lower demand for the heavier animals is pressing the average slaughter weight. Like the beef sector also the swine sector has been able to find alternative export markets for their product. In 2015, EU pork exports are expected to further expand to the Asian and African markets.

Policy

-On February 1, 2014, Russia banned pork imports from all 28 Member States as a result of African Swine Fever (ASF) findings on the eastern borders of Lithuania, Latvia and Poland. The EU has been unable to negotiate a resolution with the Russian veterinary services.

-On August 7, 2014, the Russian Government implemented sanctions on a wide range of agricultural and food products from the United States, the EU, Canada, Australia and Norway. The ban includes fresh and frozen beef and pork, poultry meat, prepared meat and sausages.

Swine

Country

EU-28

Commodity

Animal Numbers, Swine (1,000 Head)

USDA official [EU-28]

Posts estimates [EU-28]

USDA official [EU-28]

Posts estimates [EU-28]

USDA official [EU-28]

Posts estimates [EU-28]

Market Year Begin

2013

2014

2015

TOTAL Beginning Stocks

146,982

146,982

146,129

146,172

145,500

146,400

Sow Beginning Stocks

12,737

12,737

12,529

12,507

12,100

12,500

Production (Pig Crop)

256,750

257,000

256,000

259,000

250,000

260,000

Extra EU28 imports

1

1

1

1

1

1

TOTAL SUPPLY

403,733

403,983

402,130

405,173

395,501

406,401

Extra EU28 exports

572

569

450

556

475

550

Sow Slaughter

4,081

4,104

4,200

4,100

4,045

4,050

Total Slaughter

250,735

250,978

250,000

252,000

245,900

253,000

Loss

6,297

6,264

6,180

6,217

6,126

5,851

Ending Inventories

146,129

146,172

145,500

146,400

143,000

147,000

TOTAL DISTRIBUTION

403,733

403,983

402,130

405,173

395,501

406,401

The dim market outlook accelerated slaughter during the autumn of 2014.

During the first eleven months of 2014, official slaughter increased by 0.3 percent, while also preliminary backyard slaughter statistics shows an increasing trend. During September and October slaughter accelerated after the second Russian ban deteriorated the market outlook. As a consequence of the higher than expected efficiency ending inventories of 2014 are adjusted to a higher level. Based on the December census statistics of twenty-three Member States (representing 90 percent of the total herd), the EU swine herd has increased during 2014. The main expansion is reported in Spain, Denmark and Poland.

The EU swine sector is anticipated to keep up production in 2015.

Despite the low prices for piglets, the sow stock stabilized at 12.5 million head during 2014. This estimate is based on the Eurostat census figures of twenty-three Member States, representing 90 percent of the herd. While the sow herd slightly declined or stabilized in most Member States, an increase of 100,000 head is reported in Spain. Also in Poland the sow stock is expected to have increased during 2014. Despite of the outbreak of African Swine Fever (ASF) in North-Eastern Poland in early 2014, drop of feed prices had a primary influence on the hog inventories in the second half of 2014. However, inefficient structure of the industry as well as continuing strong competition from Dutch, Danish and German suppliers of pork and piglets inhibits a faster recovery of the Polish swine industry. The breeding herd is increasingly held by specialized farms in Western Europe, which high investments force the farmers to retain production. Due to the increased efficiency, this year's pig crop is forecast to increase above the production level of 2014. This is a significant revision from the official USDA forecast. The Posts' forecast assumes the closure of the Russian market for the full year. The EU swine sector has proven to be able to find alternative markets, and is expected further expand exports to these destinations (see Pork report). In line with the adjustment of the official USDA production figures, the Posts' forecast of 2015 slaughter is increased significantly to slightly higher levels than reported for 2013 and 2014.

Pork

Country

EU-28

Commodity

Pigmeat (1,000 Head)(1,000 MT CW)

USDA Official [EU-28]

Posts estimates [EU-28]

USDA Official [EU-28]

Posts estimates [EU-28]

USDA Official [EU-28]

Posts estimates [EU-28]

Market Year Begin

2013

2014

2015

Slaughter (Reference)

250,735

250,978

250,000

252,000

245,900

253,000

Beginning Stocks

0

0

0

0

0

0

Production

22,342

22,359

22,400

22,400

22,365

22,450

Extra EU28 imports

15

15

12

14

10

10

TOTAL SUPPLY

22,357

22,374

22,412

22,414

22,375

22,460

Extra EU28 exports

2,232

2,227

2,150

2,177

2,200

2,250

TOTAL Domestic Use

20,125

20,147

20,262

20,237

20,175

20,210

Ending Stocks

0

0

0

0

0

0

TOTAL DISTRIBUTION

22,357

22,374

22,412

22,414

22,375

22,460

Lower demand for heavier animals is suppressing total pork production.

Despite the revision of slaughter, pork production is not changed for 2014. During the first eleven months of 2014, average slaughter weights declined, mainly due to lighter carcasses in Italy, from average 126 kg in 2013 to 120 kg in 2014. This is caused by the lower demand for the high value pork delicacies made from the typical heavy Italian hogs. As the outlook for the feed supply for this year is not expected to change significantly, the average EU slaughter weight is forecast to decline only slightly in 2015. With the anticipated increased piglet production and slaughter, EU pork production is expected to increase to nearly 22.5 MMT.

The sector is expanding trade to Asia.

Because of outbreaks of African Swine Fever (ASF) in Poland, Lithuania and Latvia, Russia has banned EU fresh and frozen pork since February 1 and Belarus since February 20, 2014. The outbreaks of ASF also negatively affected exports to the Ukraine. In addition, on August 7, 2014, the Russian Government implemented sanctions on a wide range of agricultural and food products from the United States, the EU, Canada, Australia and Norway. Reportedly the ban will last for one year. The ban includes pork (HS0203), prepared meat (HS0210) and sausages (HS160100). In practice this effected an annual trade of 663,000 MT carcass weight (CW) of pork, to Russia (500,000 MT CW in 2013), Belarus (94,000 MT CW) and the Ukraine (69,000 MT CW). On an annual basis only about 45,000 MT CW of prepared pork (HS160249) to Russia and 20,000 MT CW of frozen pork were shipped last year. As anticipated in the Annual Report this market loss of 600,000 MT CW was for the most part compensated by exports to alternative third country markets. The remainder has been stored and is expected to come available during 2015. Exports rose most significantly to South Korea and Japan. Spain increased exports to third country destinations with about 90,000 MT CW, which includes a doubling of exports to Japan. This foreign demand is expected to further boost the Spanish production of pork. In most other Member States, however, fatteners face negative or tight profit margins. The competiveness of the EU pork on the world market is based on the lowest carcass prices recorded since 2007.

Supported by a weak Euro, the sector is expected to further expand exports.

The general Russian ban is currently in place until August 2015. It is however questionable if the ASF related ban on pork will be lifted, and the EU can restart exporting to Russia. Reportedly six EU Member States, France, Hungary, Italy, Germany, Denmark and the Netherlands, unsuccessfully attempted to negotiate the lifting the ASF ban on their products which are not covered by the general ban; live pigs, breeding material, offal and fats. The historic trade of pork offal and fats is only about 15,000 MT, mainly imported from Spain, Hungary and Poland, and would therefore have little influence on the total EU balance. In 2015, EU pork exports are expected to further expand to the Asian and African markets. The Euro has not weakened against the currencies in the main Asian markets, but has lost its value against the US$. This is expected to further support the competiveness of EU pork on the world market.

Policy

Russian ban on EU pork imports as a result of ASF outbreaks

As previously mentioned, Russia banned pork imports from all 28 Member States as a result of African Swine Fever (ASF) findings on the eastern borders of Lithuania, Latvia and Poland. Until now, the EU has been unable to find a negotiated solution with Russia for regionalization, which would have allowed exports from unaffected areas to resume. On June 30, the EU requested the establishment of a panel from the WTO Dispute Settlement Body (DSB). Russia was able to block the EU's request under WTO rules. However, on July 22, 2014, the EU finally secured a panel from the DSB.

Russian extensive ban on agricultural and food products

On August 7, 2014, the Russian Government implemented sanctions on a wide range of agricultural and food products from the United States, the EU, Canada, Australia and Norway. Reportedly the ban will last for one year. The ban includes fresh beef (HS0201), frozen beef (HS0202), pork (HS0203), poultry meat (HS0207), prepared meat (HS0210) and sausages (HS160100). An overview of the export volumes for beef, pork and poultry to Russia in 2013 is given in the Livestock Annual Report.

EU MS continue to plead for EU support for pork producers

At the January 26, 2015, Management Committee meeting, Belgium, Denmark and France, Finland and Ireland, requested the EC to open a Private Storage Aid (PSA) scheme for pork producers hardest hit by the Russian import ban. However, the Agricultural Commissioner again refused the request, stating such a measure could slow down market responses and prolong the perceived crisis situation.

NOTE

In this report the following HS codes and conversion factors are used:

HS codes

Conversion factors

Pork

0203, 021011, 021012, 021019, 160241, 160242, 160249

PW X 1.30 = CW

PW = Product Weight CW = Carcass Weight

ABBREVIATIONS

EC: European Commission

EU: All twenty-eight Member States of the European Union.

MS: An EU Member State

NMS: The thirteen new Member States which joined the EU in May 2004, January 2007 and July 2012

Benelux countries: Belgium, the Netherlands and Luxembourg

Nordic countries: Denmark, Sweden and Finland