As anticipated, the European Union’s latest round of private storage aid for pork reached full capacity this week and is now closed. The final quantity applied for and accepted was 89,841 metric tons (mt) – a total reached in just two-and-a-half weeks. By comparison, the previous scheme was open for two months (March and April 2015) and attracted only 63,969 mt. More details from the European Commission are available online.
Boneless legs accounted for 54 percent of the stored volume, followed by bone-in and boneless bellies at 13.5 percent, and fat at 10 percent. Germany and Spain were the largest utilizers, each accounting for about 23 percent of the volume, followed by Denmark (15 percent) and the Netherlands (12 percent). Nearly 64 percent of the volume was slotted for 90 days storage, with 28.5 percent booked for 150 days.
Relative to their share of EU pork production, Spain, Denmark, and the Netherlands were heavy utilizers – meaning they accounted for a larger share of the pork going into storage than the pork produced during the corresponding period. Despite continued farmer protests and recent announcements of additional aid for farmers in France, French pork accounted for a relatively small share of the subsidized storage (less than 3 percent, while accounting for 8.6 percent of slaughter). Analysts suggest the low participation rate is partly due to the fact that France’s cold storage facilities are already full. Analysts also note that the bulk of the product stored in January is likely bound for domestic processing and not likely to be exported when taken out of storage, beginning in mid-April.
EU hog prices finally gained traction in mid-January, perhaps gaining some optimism from the private storage aid program. At 1.28 euros/kg, prices were back to November levels but still down slightly from a year ago and 14 percent below the five-year average. In U.S. dollars, prices were $63.40/cwt, down 6 percent from a year ago. Piglet prices have trended higher for the first three weeks of January, most recently averaging up 4 percent from last year, at 37.76 euros/head ($41.09).
U.S. competitiveness compared to European pork should also be improving, with the hog price relationship trending closer to historic levels. EU prices have been at or above U.S. hog prices since September, with the EU premium widening since November, as shown in the chart below. However, the EU remains intensely competitive on certain items, especially in China and other Asian markets.
Sources: European Commission, USDA Agricultural Marketing Service