Negative producer margins led the sow herd to contract during 2022, given high feed costs and low piglet prices in an oversupplied market. In June 2022, the sow herd was 5% smaller year-on-year (YOY) in the eight major producing countries of the EU27, with the sharpest declines in Poland (-17%), Germany (-9%), and Denmark (-7%), noted a Rabobank publication in December.
England recorded a 17% reduction in its sow herd in the same period, which will lead to a 10% decline in UK pork production in 2023, reported the analysts.
Replenishment of Europe’s pig herd is not likely in 2H 2022 due to ongoing cost pressures, high feed, and energy costs in particular, along with continued low export demand, and pressure on domestic consumption, they stressed.
Margin pressure to remain, on high costs and lower demand
Ongoing high inflation will continue squeezing consumer budgets in 2023, pressuring pork demand. Pork may benefit from relatively high chicken prices, though, as chicken supply is expected to remain restricted due to avian influenza, commented the team.
Pork exports from the EU27 will continue to decline, but at a slowing rate. In 1H 2023, Europe may see exports to China lift, as pork supply in China is expected to be tight, they said.
ASF and social and environmental issues also driving change in Europe
In Belgium and the Netherlands, ambitions to reduce nitrogen emissions from livestock production are high on the political agenda. “In both countries, reducing the pig herd through buyout schemes has been proposed by the government as a way to deal with the issue. However, the level of compensation, the timeline, and the impact on production of such schemes is not yet known.”
In Germany, tightening animal welfare regulations, coupled with export restrictions resulting from Afrian Swine Fever (ASF) and low returns, will lead to further contraction of the herd.