Despite the decreasing pig meat prices, the lag in the adjustment of pig production meant that EU slaughterings continued to go up in the second quarter of 2015 compared to 2014 although at a slower pace, reaching +3.9 per cent for the whole first half of the year.
Almost all Member States increased production. The most remarkable growth was recorded in Spain (+9.1 per cent or 265 000 tonnes in first half of 2015) based on a strong increase of breeding sows (+5 per cent or 105 000 heads), according to the EU Autumn 2015 Short-term Outlook.
Higher production was recorded also in the other major pig meat producers: Denmark, Germany, the Netherlands, Poland, Belgium, France and the United Kingdom.
As a consequence of the below average pig meat prices, the first signs of a decline in the reproductive herd can be seen. The recently published June 2015 livestock survey shows that the number of covered sows and gilts not yet covered slightly decreased in the main producing Member States (-0.7 per cent and -1.7 per cent ) compared to June 2014.
Although this change is relatively small, it is similar to the increase of breeding sows seen in the December survey 2014.
Nevertheless, the number of piglets recorded is still on the rise (+1.1 per cent ), explaining the current depressed piglet price. These findings might limit the overall 2015 annual increase in meat production to around 2.7 per cent year-on-year and in 2016 to 0.5 per cent .
Increased production, lower EU meat prices, a depreciated euro and a strong demand from Asia
explain the surge in pig meat exports in the first six months of 2015 (+15 per cent ). The main increases were noted in shipments destined to China, the Philippines, Georgia, Balkan countries and South Korea.
Smaller volumes exported to Japan are explained by its good inventories and the fact that the US has started recovering from the 2014 PEDv episode and is regaining its market share. EU exports to Hong Kong are further eroding in favour of direct exports to China, mounting to 172 000 tonnes or +52 per cent in the first six months of 2015.
According to a recent publication of Rabobank, China might need to import an extra 600 000 tonnes in 2015 because of its shrinking pig numbers. Back yard farming seems to be pushed out while larger scale farms remain in business. This could be an opportunity for EU exports to China.
Nevertheless, in the past in similar situation domestic prices went up limiting consumption and the growth in imports. In addition, a close eye should be kept on the euro/yuan exchange rate and the consequences of the financial crisis on Chinese consumer demand and its meat sector.
Driven by strong global demand, increased competitiveness on the world market (price and exchange rate) and an expected lower supply in Brazil, EU exports are projected to grow by 144 000 tonnes (or 7.5 per cent ) in 2015 to slightly over 2 million tonnes.
In 2016, EU exports could continue to expand but at a slower pace due to increased competition and availabilities in US and Brazil. As Russia is continuously encouraging its domestic pork production and because of the economic situation, the EU exports towards this destination are not expected to resume significantly even if the sanitary and economic import ban were to be lifted.
Firming EU Pig Meat Prices, but Still Below Average
In total 64,000 tonnes, mainly boned legs and bellies, were offered to the private storage scheme opened in March 2015.
Denmark, Spain and Poland represented 56 per cent of the concluded contracts.
A new private storage aid scheme could be expected by the end of this year if the market further declines, while Member States can opt to use the solidarity package for farmers also for the pork sector.
The seasonal price increase during summer was flattened out in 2015 while we can notice a small
recovery in the last weeks, with prices reaching €152/100 kg c.w. by the beginning of September, still €15-20/100 kg below the 2010-2014 average but €15 above the price at the beginning of 2015.
Prospects of increased production and a limited export growth relative to total production could encourage a further growth in consumption to reach 32.7 kg per capita in 2015 compared to 2014 and a stabilisation next year. This level of consumption is still lower than before 2008.