After months of producer requests, the European Commission moved forward this week with a private storage aid plan for pork. This mechanism has not been used since 2011, and there are some important differences this time. The level of aid is 39 percent lower, and does not allow earlier (after 60 days) removal for export. So the program is not likely to attract as many applications, but the announcement could still add a psychological boost to the market.
Similar to 2011, aid also does not apply to fat, lard or variety meat. Pork muscle cuts can be stored for 90, 120 or 150 days, with aid varying by cut and storage duration. More details are available from this eligible products list and this European Commission news release.
Even ahead of the announcement, EU pig prices had already trended modestly upward since late January, with prices recently averaging $71.88/cwt – up 8 percent over the past four weeks. However, prices were still down about 26 percent year-over-year in U.S. dollars and down about 10 percent in euros. U.S. prices have exceeded EU levels since early February, ending an anomaly that lasted about 11 months. This return to a more normal price spread should eventually improve U.S. competitiveness, even with the strong U.S. dollar.
EU pork/pork variety meat exports managed to set a volume record last year despite the loss of the Russian market, which had taken 18 percent of the EU’s export volume (or 480,000 metric tons) in 2013. EU exports have been relatively steady for the past three years, with 2014 export volume (2.75 million mt) up 1.4 percent from the 2013 record. Export value slipped 1 percent, however, to $7.3 billion. The volume that would have gone to Russia (and 34,000 mt that should have gone to Ukraine) ended up in the Asian markets led by China (764,222 mt, +8 percent), Hong Kong (425,585 mt, +4 percent), Japan (337,989 mt, +35 percent), Korea (229,409 mt, +98 percent), the Philippines (163,993 mt, +94 percent) and Taiwan (43,133 mt, +306 percent). Exports were also higher to Australia (75,948 mt, +47 percent) and the U.S. (91,309 mt, +41 percent).
China/Hong Kong, Japan, the ASEAN region and Korea accounted for 73 percent of EU export volume last year – up from 60 percent in 2013 – with a remarkable volume increase of 395,000 mt. Excluding variety meat, EU exports were 1.674 million mt, down 2 percent. Growth was achieved in all main markets, but did not fully offset the 350,000 mt that would have been shipped to Russia.
Data sources: Global Trade Atlas and European Commission