The next round of private storage aid for the EU pork industry is set to take effect Jan. 4, as detailed in the Official Journal of the European Union. Product is expected to begin entering storage in the second half of January.
Fresh pork lard has been added to the list of eligible products, but the list still does not include variety meat. While the amount of aid varies by product, it is 20 percent above the relatively low level offered in the last round, which opened in March 2015. Stored product may be removed for export prior to the terms agreed in the contract, provided that it has been in storage for at least two months. Due to limited funds and a high level of interest within the EU industry, this round will likely be open for a short period of time.
EU hog prices are on a downward trend since late September. Early December prices averaged 1.26 euros/kilogram, down 7 percent from last year’s low level and 20 percent below the five-year average. In U.S. dollars, prices averaged $62.47/cwt, down 18 percent year-over-year. EU average hog prices have been even with or higher than U.S. prices since September, although the gap between EU and U.S. prices remains historically narrow. Thus the relative pricing situation has improved (especially over the past five weeks) but the EU remains very competitive, especially on certain export items. EU piglet prices have generally been edging lower. At 33.17 euros/head, the latest prices were down 1 percent from November and 10 percent below last year’s low level.
EU pork/pork variety meat exports hit a monthly record in October at 298,450 metric tons (mt), up 2 percent from the previous record set in October 2014. Exports to China/Hong Kong were up 19 percent to 149,322 mt, accounting for 50 percent of export volume. October exports were also larger year-over-year for Japan, the United States, and Vietnam, but lower for Korea, the Philippines, Australia and Taiwan. For January through October, exports were on a record pace at 2.435 million mt, 7 percent ahead of last year. Looking specifically at pork muscle cuts and excluding variety meat, EU exports for January-October were up 8 percent to 1.45 million mt, led by strong growth to China/Hong Kong (491,259 mt, +38 percent).
Given the strength in exports, low EU pork prices primarily reflect the significant increase in EU production at a time of generally larger global supplies (China being the exception), sluggish demand within the EU and closure of the Russian market.
Data sources: European Commission, Global Trade Atlas