Pork Impasse with Russia Taking Toll on EU Prices; Now Lower than U.S. Average

At the end of February, pork prices in the European Union declined another 1.2 percent over the previous week. In euro terms, prices were down more than 10 percent year-over-year and the lowest since early February 2012. In U.S. dollar terms, the EU average price was $97/cwt – down 4.5 percent year-over-year.

Prices have been hit hard by Russia’s suspension of pork imports from the EU, which began Jan. 30 following confirmation of African swine fever (ASF) cases in EU member state Lithuania (and later in Poland, also an EU member). Russia accounted for 21 percent (valued at $1.55 billion) of EU pork and variety meat export value last year, trailing only China/Hong Kong ($1.94 billion). The EU also exported $352 million worth of pork fat to Russia in 2013, accounting for 74 percent of total EU fat exports.

U.S. hog carcass prices are now higher than the EU average, taking into account a one-week lag for EU price reporting. Typically U.S. and EU prices converge briefly in the summer, but not in the first quarter of the year.

This week the French Pork Federation asked President Francois Hollande to intervene in the impasse with Russia. Agricultural officials from EU member states considered low-risk for ASF are under increasing pressure to pursue individual agreements with Russia that will allow their exports to resume, but so far the EU has remained focused on a unified approach. On March 14, Sergei Dankvert, head of Russia’s Veterinary and Phytosanitary Surveillance Service was scheduled to meet on this issue with Paola Testori Coggi, EU director general for health and consumers. But on that same day, an EU spokesman issued a statement saying the EU has no plans for further trade meetings with Russia after high-level talks on this issue, and on a proposed EU trade pact with Ukraine, proved unproductive.

The trade suspension is also taking a toll on Russia’s meat processing sector. A news report from Kaliningrad (the Russian exclave on the Baltic Sea, between Poland and Lithuania) says one of the region’s largest meat canning plants has temporarily suspended operations because of lack of raw materials. The report adds that all meat plants in Kaliningrad are facing losses due to the impasse and thousands of meat processing jobs are in jeopardy. The minister of agriculture for the Kaliningrad region says processors have cut production by 40 percent and are anxious for the opportunity to obtain pork from alternative sources. In the meantime, they are utilizing more poultry and beef in their production.

On a related note, Russia also announced that it will no longer accept any food imports transiting through the Lithuanian port of Klaipeda, and that this policy may be widened to include all Lithuanian cargo terminals.