Despite a series of negative market factors in 2020, the European Union (EU) swine sector is projected to produce a record volume of pork in 2021, according to the latest USDA Foreign Agricultural Service Global Agricultural Information Network (GAIN) report. As a result of Europe’s success in diversifying its export markets, USDA reports falling pork exports to China are expected to be largely offset by increased exports to other markets.
EU market leaders continue to expand production in Spain, Denmark and the Netherlands. Meanwhile, production is recovering in Italy, France, Belgium and Poland. Exports to China and the UK are falling, but USDA reports that exports are increasing to other Asian markets such as the Philippines and Vietnam.
In 2022, EU pork production is forecast to decline based on lower carcass prices and the threat of additional African swine fever (ASF) outbreaks in Central Europe. Although EU exports have been able to outcompete other net producers based on producer flexibility and control over the production chain, experts say the current market situation is fragile given the EU’s dependency on the Chinese market. To reduce its dependency on China, the EU is aiming to control pork production expansion and to continue to diversify its export markets.
The report highlights key points contributing to EU’s position in the market.
1. Carcass prices fell in 2020 from a record high to a record low.
Despite a series of challenges in 2020, the pork sector produced a record high piglet crop and record high pork production. While the Belgian and German sectors were hit by ASF outbreaks, the Spanish, Dutch, and Danish sectors benefitted from the Chinese export ban on Belgian and German pork and boosted their exports. The COVID-19 outbreak did not have a big impact on domestic consumption as the closure of the food service sector was partly offset by increased retail sales. Still, production and trade-disrupting factors dropped piglet and carcass prices about 40% from December 2019 to December 2020 in the Netherlands. Similar reductions were reported in Germany and Poland. Only a 25% reduction was seen in Spain, France and Denmark.
2. Exports are driving pork production in western Europe, restructuring in central Europe.
Partly due to a backlog in slaughter in Northwestern Europe, the EU swine herd increased significantly, while sow stocks remained virtually unchanged in 2020, USDA reports. Total stocks increased most significantly in Spain, Denmark, Poland, France, Hungary, and Bulgaria. The expansion in Spain, Denmark, and, to a lesser extent, France, was mainly driven by pork exports to China. Expansion in Poland was a result of the opening of large-scale operations with a high biosecurity standard in response to ASF outbreaks in the country.
3. Increased slaughter is forecast in the leading pork producing countries, except Germany.
Strong sow inventories coupled with the expectation of further improvements in fertility rates are forecast to result in a new record piglet crop for the EU in 2021, USDA reports. Despite numerous calls from Europe’s swine industry, the EU policy draft prohibiting swine breeding in backyard farms is still pending. An increase in the number of piglets to be slaughtered in the second half of the year is expected mainly as a result of the reduction of exports of slaughter hogs to Germany due to ASF. During the first half of this year, EU official slaughter rose by 3.45%.
4. Profit margins are expected to cut piglet production and slaughter in 2022.
Improving market conditions were negatively impacted by reduced Chinese demand for pork and elevated feed prices in early 2021. Chinese pork imports are forecast to remain below the level reached in 2020 for both 2021 and 2022. Under the current market conditions, sow stocks are expected to fall to a record low of 11.15 million head in 2022. Major cuts to sow inventories are anticipated in Germany, Poland, France and the Netherlands. Even in Spain, which has shown steady growth in slaughter since 2013, a leveling-off is anticipated, USDA reports. A decline in Polish slaughter is also forecast after an increase in 2021.
5. EU pork production will reach a new record in 2021.
Slaughter weights are key in forecasting pork production, and the EU average has increased steadily since 2012. Slaughter weights have increased 0.4% per year for the past 20 years, equivalent to approximately 0.36 kg. Still, elevated feed prices and falling carcass prices are forecast to pressure weights for the remainder of 2021. Slaughter weight is anticipated to increase by an average of 0.3%, resulting in a record EU pork production in 2021 of 23.68 million metric tons.
6. Record production will be challenged by decreased Chinese demand.
During the first half of 2021, EU pork exports rose 14% with increased exports to China, the Philippines, Vietnam, and Chile. USDA reports that EU pork exports to the Philippines benefitted from lower import duties.
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