The European Union’s beef and pork production will rise even faster than expected this year, boosted by increasing carcass weights, a US government agency said.
Thanks to booming production and the weakened euro, exports are set surge, even in the face of increased global competition, and with Russian markets remaining closed off.
Pork exports, in particular, are headed for an all-time high.
But despite the pace of exports, stagnant domestic production will still leave the EU with a protein glut that will weigh heavy on prices in 2016, The US Department of Agriculture’s Brussels bureau said.
Pork production to surge
The bureau upped its forecast for 2016 pork production to 23.242m tonnes, up from an earlier estimate of 22.912m tonnes.
This is just short of the record levels seen last year.
Meanwhile domestic demand is expected to remain sluggish.
“Only in Central Europe is there a potential for growth of pork consumption.”
Given the stagnant domestic consumption, about 500,000 tonnes will probably be stored commercially.
A storage programme launched by the European Commission in January of this year absorbed over 90,000 tonnes of pork, on 90-day or 150-day storage contracts, meaning these stocks will find their way back into the market before the end of the year.
The glut will weigh on pork, which are already down 5.9% year-on-year, at 129.92 euro cents a kilo, according to date from the European Commission.
And the bureau warned that “the world market is unable to absorb all the additional supply from the EU.
EU exports will face increased competition this year, with a trade deal reached between South Africa and the United States, and another reported to be in the final stages between South Korea and Brazil.
And Russia, historically a key importer, has banned European pork imports for quarantine reasons.
The bureau said “it is not expected that the Russian market will re-open anytime soon”.
And with “good profitability” in the US sector, competition from that region is expected to intensify.
“Despite this, EU product is expected to remain highly competitive,” the bureau said.
“Low carcass prices and a favourable exchange rate will support exports in 2016,” the bureau said.
In particular, the bureau expected Chinese opportunities to “remain positive despite the economic slowdown, as domestic production is anticipated to remain sluggish”.
The bureau saw pork exports hitting a record 2.500m tonnes in 2016, up 170,000 tonnes from a previous estimate.
Beef demand stagnates
A similar story was seen in beef.
Ideas of beef production were lifted by 140,000 tonnes to 7.700m tonnes, the highest level since 2011.
“With stagnating domestic consumption all EU member states, and without an export outlet, this supply will be stockpiled and will result in pushing domestic prices downward,” the bureau said.
Beef carcass prices are down 3.7% year-on-year, at 376.0 euro cents a kilo, according to the latest data from the European Commission.
New markets found
Still, exports will rise, if not fast enough to absorb excess capacity.
Russia has banned EU beef imports as part of a sanction campaign.
“But as foreseen in the previous reports, the EU diverted their exports to other markets, mainly destinations in the Balkans, Asia and Africa,” the bureau said.
Exports were seen at 340,000 tonnes, a 30,000 tonne upgrade, and also a five-year high.
(Source – http://www.agrimoney.com/news/eu-faces-larger-than-expected-red-meat-glut-this-year–9348.html)