Brussels, 10th April 2006
O/REF: Circular C-012-2006-EN
RE: PIGMEAT Market Situation and Outlook
The Forecasting Committee of the Advisory Group on Pigmeat met in Brussels on Friday, 31st March 2006. It emerged from the meeting that the EU pigmeat market in 2006 will chiefly be characterized by:
Ø numbers slightly up mainly because of some new Member States such as Poland, and
Ø firm prices partially influenced by the confidence crisis that is affecting the poultrymeat consumption.
1° Community Market
1.1. Numbers
The December surveys show numbers at about 151.717 mio. pigs i.e. slightly up (+0.4%) on December 2004. The majority of Member States record decreases. The modest increase is thus attributable to some of them such as Germany (+2.5%), Greece (+4.8%), Italy (+2.5%), Lithuania (+5.3%) and Poland (+7.6%). Poland has the third biggest pig population, following Germany and Spain.
While the number of piglets goes down (-1.7%), the number of pigs weighing 20 to 50 kg is up (+2%) to reach 35.,5 mio. head.
The number of sows is 1% up. For the first time, the number of mated sows is up (+2%).
The new Member States account for a total of 19% of the EU’s numbers. Most of them record decreases such as Hungary (-5.1%), Slovakia (-3.6%), Czechia (-6.7%). Only Poland, Slovenia and Lithuania escape the slump.
1.2. Production
Where expressed in head, the EU-25 supply will be 0.9% up in 2006, after marking the pace last year (-0.6%). The rise will be modest during the first two quarters (+0.8% and +0.4% respectively), and more pronounced during the last two quarters (+1.2% and +1.1% respectively). The increase is mostly attributable to Germany (+1.3%) and Poland (+11.4%) which, with 25.372 mio. pigs produced, follows on Denmark’s heels (25.715 mio.) and France’s heels (25.730 mio.).
Where expressed in tonnes, the EU-25 production will be 1% up to reach about 21.331 mio.
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Five Member States account for 65.4% of the EU supply:
Germany / Denmark / Spain / France / Poland21.4% / 8.4% / 14.9% / 10.6% / 10.1%
1.3. Prices
Community market prices – E grade / evolution and forecast
2000 / 2001 / 2002 / 2003 / 2004 / 2005 / 20061st quarter / 121.73 / 173.90 / 138.97 / 126.27 / 125.51 / 139.33 / 138.76
2nd quarter / 142.28 / 181.18 / 138.04 / 124.31 / 135.89 / 135.56 / 140.73
3rd quarter / 148.71 / 166.09 / 138.00 / 136.49 / 149.74 / 143.88 / 143.93
4th quarter / 153.06 / 144.95 / 127.05 / 121.88 / 142.06 / 133.83 / 133.27
Year
/ 141.64 / 166.53 / 135.51 / 127.24 / 138.41 / 139.10 / 139.17Last year the prices were 0.5% up to reach € 139.10 per 100kg cw. (annual average).
In view of the availability in cereals and the animal feed cost, the years 2004 and 2005 were satisfactory for pig farmers. The good profitability of the sector is reflected in the pigmeat-feed index which has been above 100 since 2004. It peaked at 121 in June and August 2005.
The farmers’ situation is likely to be strengthened in 2006. Already the prices during the first quarter were higher than forecasted. The most probably hypothesis during the second quarter is a continued rise. This can be explained by dynamic demand both inside and outside the EU, stimulated either by the confidence crisis that is putting the poultrymeat consumption upside down or by the blocking of Brazilian meat in Russia on accounts of Foot-and-Mouth Disease (FMD).
The influence that Avian Influenza has within the EU varies a lot from one Member State to another: it is particularly pronounced in Italy, Greece, Portugal, and Hungary. It causes moves to consumption of beef (limited availability) and pigmeat.
National market prices – E grade / evolution and forecast
(€ per 100 kg cw)
/ 1st quarter2004 / 2nd quarter 2004 / 3rd quarter 2004 / 4th quarter 2004 / 1st quarter 2005 / 2nd quarter 2005 / 3rd quarter 2005 / 4th quarter 2005 / 1st quarter 2006 / 2nd quarter 2006 / 3rd quarter 2006 / 4th quarter 2006
EU / 125.51 / 135.89 / 149.74 / 142.06 / 139.37 / 135.59 / 143.87 / 137.63 / 139.04 / 140.73 / 143.93 / 133.27
AT / 127.29 / 136.45 / 159.97 / 148.55 / 147.77 / 141.25 / 148.09 / 143.29 / 143.34 / 143.00 / 148.00 / 143.00
B / 119.20 / 132.54 / 148.18 / 140.31 / 137.78 / 134.83 / 138.29 / 133.69 / 131.62 / 143.00 / 141.00 / 138.00
DE / 129.98 / 139.40 / 160.29 / 152.24 / 147.74 / 143.81 / 149.47 / 147.35 / 144.95 / 151.00 / 151.00 / 145.00
DK / 108.65 / 119.32 / 129.45 / 125.33 / 122.52 / 118.83 / 124.10 / 122.87 / 118.56 / 129.00 / 124.00 / 114.00
ES / 128.90 / 148.83 / 150.37 / 128.09 / 142.63 / 146.21 / 152.01 / 133.01 / 150.76 / 159.40 / 160.50 / 132.90
FI / 119.82 / 125.10 / 130.02 / 136.00 / 139.62 / 139.45 / 137.97 / 134.62 / 133.10 / 132.00 / 134.00 / 135.00
FR / 118.97 / 129.54 / 140.82 / 135.85 / 135.78 / 131.86 / 139.04 / 133.42 / 137.36 / 140.00 / 142.00 / 130.00
UK / 150.42 / 162.11 / 152.25 / 140.14 / 142.98 / 150.91 / 149.45 / 145.76 / 142.60 / 144.41 / 142.97 / 145.86
GR / 144.68 / 143.26 / 174.72 / 174.11 / 171.78 / 158.80 / 190.50 / 192.86 / 196.55 / 190.00 / 195.00 / 195.00
IE / 128.64 / 131.77 / 136.91 / 135.20 / 129.24 / 127.06 / 133.68 / 133.49 / 130.60 / 132 / 137.00 / ---
IT / 138.84 / 141.60 / 168.90 / 170.89 / 142.17 / 132.94 / 147.16 / 146.68 / 156.28 / 139.30 / 159.30 / 153.90
LU / 128.07 / 140.67 / 162.07 / 153.17 / 149.69 / 144.94 / 149.18 / 147.90 / 145.56 / --- / --- / ---
PT / 132.43 / 147.01 / 153.67 / 133.43 / 143.23 / 147.50 / 159.19 / 140.31 / 155.60 / 171.00 / 174.00 / 161.00
NL / 115.45 / 128.67 / 142.68 / 134.18 / 130.28 / 127.93 / 132.49 / 131.58 / 127.99 / 125.00 / 128.00 / 130.00
SE / 116.94 / 125.80 / 133.94 / 141.64 / 132.20 / 130.88 / 133.34 / 136.41 / 131.36 / 132.47 / 133.54 / 138.88
1.4. External trade
1.4.1. Imports
Last year’s imports collapsed (-53%) because of the accession of the new Member States that used to be the major suppliers to the EU.
21,000 tonnes of pigmeat were imported. The major origins were the USA, Croatia, Norway, and Switzerland.
Imports into the EU
2003 / 2004 / 2005UE-15 / 72,108 t. / 42,911 t. / 20,681 t.
UE-10 / --- / 1,467 t. / 2,110 t.
UE-25 / --- / 44,378 t. / 18,571 t.
4.2. Exports
In 2004 the EU exported 1,828,000 tonnes (product weight) of pigmeat and derived products.
Russia is still the EU’s major trading partner in volume as regards low quality pigmeat (trimmings, fats, etc).
It is important to note that the Asian market, notably the Japanese market, is dynamic. Japan has begun to significantly improve its trade in first-quality cuts with Australia following the USA/Canada crisis on BSE in 2004.
Exports from the EU
2003 / 2004 / 2005UE-15 / 1,510,000 t. / 1,689,000 t. / 1,658,660 t.
UE-10 / --- / 139,000 t. / 262,942 t.
UE-25 / --- / 1,828,000 t. / 1,921,602 t.
Last year the exports hit a record again, probably thanks to the new Member States that account for 13.7% of the total.
The major destinations are Russia (25.1%), Japan (15.9%), the USA (3.8%), and the accession candidates.
However it should be pointed out that, unlike the previous year, there was a loss of market shares in Japan. Despite Hungary’s arrival and the increase in Japan’s purchases (+1.1%), the EU-25 exports lost ground compared with the USA (+12%), Canada (+6%), Mexico (+5%), and Chile (+30%). Denmark, the first biggest exporter in the EU, recorded a fall by 13.7%.
2° Selected National Markets
2.1. Belgium (4.6% of EU-25 production)
Fall in production in 2005 (-3.3%) and in 2006 (-1.8%), and fall (instead of decline) in the prices except during the 2nd quarter. The fall should be lessened by the impact of the confidence crisis that is affecting the consumption of poultrymeat.
2.2. Germany (21.4% of EU-25 production)
Increase in numbers (+2.5%), a sign of a return to profitability. All the categories make the most of it.
Besides, the purchases of pigs (piglets and pigs for slaughter: +22%), mainly from Denmark, pushed the slaughterings upwards (+4.4%). Same trend to continue in 2006 at lowest levels (slaughterings: +2.4%). The increase in production would be concentrated during the first half of the year.
Last year the prices increased modestly (+0.7%) due to a fall during the second half of the year. For the year 2006 as a whole the prices are set to go up more significantly (+1.4%). The prices are supported by the disturbance caused to consumption of poultrymeat and by dynamic exports. However this picture has recently been tarnished by the outbreak of Classical Swine Fever (CSF) in one of the major pigmeat producing regions.
2.3. Denmark (8.4% of EU-25 production)
Big fall in numbers (-6%) because small farmers terminated business.
Production in 2006 is set to fall to 25,715,000 head or -0.2%. Given the outcome of the December census, the fall is likely to occur during the second quarter (-3.1%), the third quarter (-0.4%), and the fourth quarter (-0.3%).
Last year’s prices stabilized (+1.7%). In Denmark profitability is still low because of high wage costs. Many slaughterings are currently carried out in Germany.
So the sales of pigs (piglets, pigs for slaughter) are on the increase exceeding 3 mio. head in 2005.
In 2006 noteworthy stabilization of the price at € 122 per 100kg cw. (annual average). The annual average takes no account of the bonus that is paid out to farmers at each year-end.
After an exceptionally performant year 2004, exports went down in 2005, notably to Japan, China and Australia.
In total about 100,000 tonnes will have been redeployed onto the EU market as compensation for the bad results of exports. At best a stabilization can be hoped for in 2006 owing to exacerbated competition in Japan (Canada, USA).
2.4. Spain (14.9% of EU-25 production)
Stable numbers, even slight drop in sow numbers. Status quo could be explained by the farmer’s low cash flow.
A drop in production during the first third quarters (-1.1%, -3.6%, -0.3% respectively) and a recovery during the fourth quarter (+5.1%) are forecasted so that the annual production will be very comparable with 2005.
But on the other hand, the prices are soaring because of atonic production and tonic demand {both domestic demand, European demand or international demand (Russia, Latin America)}.
2.4. France (10.6% of EU-25 production)
Erosion of sow numbers (-1%) but static numbers.
Setback in production in 2005 (-1.1%) and probably also in 2006 (-0.7%). It follows the downward trend that was triggered by the crisis in 2003. The production tool is getting old. Indebtedness continues on. Environmental constraints are mushrooming.
The fall in slaughterings is compensated by heavier carcases.
Increase in sales to Greece and Italy. The purchases are mainly made up of Spanish meat to the detriment of Denmark and the Netherlands.
Fall in exports.
Despite a weakness during the second half of the year, the prices showed a shy improvement in 2005 (+2.9%). Same trend for 2006 (+1.9%).
In 2006 the impact of Avian Influenza combined with pressure from a reduced supply leads to revised forecasts. The average price during the first quarter 2006 reached € 137.29 (€ 136 in 2005). The forecasts for the second and the third quarters are very positive.
2.6. Italy (7.2% of EU-25 production)
The expert was absent.
2.7. Hungary (2.2% of EU-25 production)
Drop in numbers (-5%) to some 3.8 mio. head in December 2005 (11 mio. in 1990).
The prices during the first quarter went up. The short-term forecasts are positive because of the confidence crisis in the poultry sector and the breakthrough of exports to Japan, South Korea.
2.8. Netherlands (6% of EU-25 production)
Drop in numbers to 11 mio. head (-1.3%). The gross indigenous production is slightly up on 2005 releasing a potential destined for dispatch of pigs to Germany and certain new Member States. So the increase in sales of pigs will continue in 2006. It will lead to a fall in slaughterings.
Consumption improved in 2005. Favourable trend for 2006 owing to the impact of the Avian Flu scare and the high price of beef.
Last year the prices went slightly down (-0.6%) compared with the high level they had reached in 2004. The fall should have continued in 2006 (-3.5%) but the forecasts must be revised upwards given the new circumstances.
2.9 Poland (10.1% of EU-25 production)
Numbers on the increase to 18.8 mio. head in December 2005, ranking 3rd after Germany and Spain. Sow number up by 9.7%.
Production reflects the increase in numbers. Already in 2005 the big fall recorded in 2004 (-10%) had been curbed (-1.7%) putting production at 22.8 mio. head. It is proof of regained profitability thanks to favourable prices and reduced animal feed cost.
In 2006 an increase by 11.4% is expected pushing production up to 25.4 mio. head just behind Denmark and France.
Sales to other new Member States and purchases of pigs are on the increase. But on the other hand, exports to Russia and Ukraine have stopped (since November 2005 and March 2006 respectively).
As a result of this, despite a favourably oriented consumption, the prices collapsed in 2005 (-20%) and eroded during the first quarter 2006 (-7%). Improvement expected during the second quarter (+5.5%).