Audio: Expansion Continues for EU Pork Production, Exports

It has been nearly two years since Russia closed to pork from the European Union due to an impasse over African swine fever. Since that time, large volumes of low-priced EU pork have been entering other international markets – especially in Asia – and altering the landscape of global pork trade. U.S. Meat Export Federation Economist Erin Borror recently updated pork producers and exporters on this situation, with highlights from her presentation included in the attached audio report.

Borror notes that European producers seem to be weathering this period of persistently low prices much better than expected, with EU pork production increasing 4 percent year-over-year in the first half of 2015 and likely to finish the year nearly 3 percent higher. A more modest increase of about 0.4 percent is projected in 2016, but exports are still likely to expand due to sluggish pork demand within Europe and continued weakness of the euro.

TRANSCRIPT:

Joe Schuele: It’s been nearly two years since European pork lost access to Russia, its largest export market, due to an impasse over African swine fever. This has pushed large volumes of low-priced European pork into other global markets, especially in Asia. In this U.S. Meat Export Federation report, USMEF Economist Erin Borror provides producers and exporters with an update.

Erin Borror: Part of the reason their prices are so low is not just the fact that they lost Russia but that their production has been up huge in the first half. That’s more than 4 percent in the first half, and that’s finally slowing down, so now for the year it’s up 2.7 percent, and then next year up another modest increase, about .4 percent, so even though you’ve read about the dairy and pork producer protests in Europe and the commission still looking at what can they do to bail out the producers, we still expect a modest uptick in production next year, so essentially not a big exit of producers, even with losses over the past year and a half or so now. The euro softened again here recently and that helps give them that extra edge. But their prices, even in euro terms, are down about 13 percent from the 5-year average.

Joe Schuele: With persistently low prices, many have expected Europe to lose large numbers of producers. But Borror says she doesn’t expect to see that anytime soon.

Erin Borror: We had these same thoughts when they were implementing their sow stall ban and when they had high feed prices and years of losses, and they seem to just get more consolidated and more efficient. When they built new barns when they had to comply, of course you’re not going to build the same size, you’re going to expand, so I just don’t see a slowdown from the EU. France would be one area to watch. You could see some producers exit in France – they are the ones that have been hit the hardest. They’re less efficient on the packing side for sure, and they do have the disadvantages in labor. That would be one area to watch if you want to look for a pullback. But otherwise the EU competition is here to stay, and they’ve already become quite entrenched in our market.

Joe Schuele: For more on this and other trade issues, please visit USMEF.org. For the U.S. Meat Export Federation, I’m Joe Schuele.