Tough times in the pig sector

Almost 90,000t of pigmeat has gone into the Aids to Private Storage scheme (APS) during the three weeks the scheme was open in January. This shows the serious state of the pigmeat market and pressure on the country’s remaining pig farmers.

The amount going into storage from the countries using the scheme broadly reflects the number of pigs processed in each country. The top pig-producing country in the EU is Germany, with 58m pigs processed in 2013, followed by Spain on 41m, Poland 19m, Denmark 19m and the Netherlands 14m. Denmark and the Netherlands are the EU’s top net exporters of pigmeat.

APS is an EU funded scheme which finances factories to store meat at times when the market is very weak, and allow them to sell it at a later date when market conditions improve. The maximum time for which storage funding is given is 150 days.

APS is very much a short-term solution to market problems, and if the market is weak as it has been in pigmeat for a prolonged period it pushes the problem down the road for a few months. Present problems in the pig industry are not confined to Ireland with prices being even worse in many European countries.

Cause of the problems

While the EU trade embargo with Russia hit all agri-food exports, the impact has been most felt in the pig sector. Irish food exports to Russia increased fourfold in the years between 2009 and 2013, and after the UK, Russia was the next biggest volume buyer of Irish pigmeat and byproducts. The same applied to the other pigmeat exporting countries, with Poland in particular losing its main market. The misleading World Health Organisation report on processed meat being a cause of cancer in October damaged consumer demand and while it is recovering; the lost sales cannot be caught up.

Apart from market problems there is also increased supply coming forward, with numbers in Ireland running 21% ahead of the first two weeks of 2015 and 31% up on last year in the north. Overall, 2015 production in Ireland was 6% ahead of the previous year. Increased supply wasn’t confined to Ireland, with the EU in total expected to have a 3% increase in supply in 2015 and a 0.5% increase in 2016 according to the EU market and prices short-term outlook. The US is expecting a 1% to 2% increase in production to 10.25m tonnes on continued strong recovery from the porcine epidemic diarrhoea virus or PEDv.

Elsewhere, the major pig-producing countries of Canada, Russia, and Brazil are all forecast to have an increased production of pigmeat this year, and the USDA is forecasting exports by the major traders to increase by 2% and that “robust supplies [will] drive prices lower, stimulating consumption”.

Irish pig industry

Unlike beef and sheep production, Ireland has a relatively small number of pig farmers. However, pigmeat is the third most important agri-food sector after dairy and beef. There are around 300 commercial pig farmers who in 2015 delivered 3.1m pigs to Irish factories which produced 275,000t of pigmeat. This was up 8% on 2014 and in turn export volumes were 8% higher than the previous year. However, farmgate price fell by 10% in 2015 and this was also reflected in the decline in the export value of pigmeat by €10m to €570m, despite the volume of product exported increasing by 18m tonnes to 230m tonnes. This information was released by Bord Bia in its Export Performance and Prospects 2015 to 2016 publication and pigmeat along with live cattle exports are the only sectors declining in export value on the previous year.

Markets

Unlike beef and dairy farmers, who export up to 90% of their production, there is a strong domestic market for pigmeat of almost 150,000t. However, this isn’t all Irish-supplied, with two-thirds of the pigmeat consumed in Ireland imported, particularly from Denmark and the Netherlands.

Britain is the main export destination for pigmeat and the weak euro in 2015 helped drive this trade. It increased by 6% to 90,000t, with a value close to €350m. This is over 60% of the total value of pigmeat exports in 2015. According to Bord Bia, there was a strong increase in shipments to Germany, Sweden, Italy and France, but a decline in sales to Denmark and Belgium. Overall exports to the continent were 60,000t, but the value of this trade fell by 6% to just over €90m.

The impact of losing the Russian market truly kicked in last year. It has been replaced by development of alternative non-EU markets, particularly in China, which is Ireland’s second-largest volume export market on 40,000t, worth an estimated €140m. Other Asian markets and Australia take a further 40,000t and combined these non EU markets are worth an estimated €130m.

Prospects

The huge take-up of the APS scheme in the main pig-exporting countries with lower pig prices than Ireland suggests that the market cannot handle current production. In the midst of the gloom, the one piece of positive news for Ireland is the development of the Chinese market, with 2015 sales up 40% on the year before.

Increased global supplies from the US, Canada and Brazil means that export markets will be well supplied in the year ahead. However, if progress could be made on Russia, it would have a positive impact on the Irish and EU industry. Even partial access for pork fat, lard and offal, which are not subject to the trade embargo, would be a help. These products made up 350,000t of the 850,000t exported by EU countries prior to the ban imposed by Russia in January 2014 in response to African Swine Fever (ASF) outbreaks in the Baltics and Poland.

Russia has refused to treat the EU regions differently and it has been referred to the WTO. These products were excluded by the EU from the trade sanctions imposed in response to Russian activities in the Crimea and Ukraine, so it is a technical issue. The EU farm organisation COPA-COGECA has called on commission president Jean-Claude Juncker to step up “technical negotiations” with Russia to get access for these products.