June 17, 2016
Oversupply crisis and ASF weigh down on Poland's swine industry
By VLADISLAV VOROTNIKOV
An eFeedLink Exclusive
Since 2010, Poland's swine population has fallen significantly from 15 million to 11 million head as the industry faces an acute oversupply crisis marked by extremely low prices, barely making ends meet for farmers. According to market participants, the average price per kilogram of pork is now PLN 4.7 – 4.8 (US$ 1.19 – 1.21). This is nearly 40% lower compared to 2013 and in fact corresponds to the actual production cost of pork.
According to Witold Choiński, head of Poland Meat Association Polskie Mięso, ten years ago Poland was the third largest producer of pork in the European Union (EU) with a swine population of about 21 million head, but the industry has since been ruined by the Russian food embargo and outbreaks of African swine fever (ASF) at the northern and eastern regions of the country. He estimated overall losses of Polish pig farmers from 2014 to 2015 from these two reasons to be at PLN 1 billion (US$ 253 million).
Preliminary studies of the country's Institute of Agriculture and Food Economy estimated that in first half of 2016, the volume of pork production will be 1.09 million tonnes in live weight, 8% lower versus the same period in 2015. And in the second half of 2016, the fall will accelerate to 10% on a year-on-year basis, with production volume reaching 1.05 million tonnes in live weight.
If this downtrend continues, within the coming several years in the EU, Poland may rank only as the 7th largest producer of pork, lagging behind top producers Germany and Spain, and also behind France, the Netherlands, Denmark and Belgium.
The oversupply crisis
Prior to the current oversupply crisis seen in Poland's swine industry, the country had exported 420,000 tonnes in slaughter weight of pork abroad, equivalent to US$ 1.25 billion in value. About 52,000 tonnes had been exported to China and nearly 100,000 tonnes to the customs union of Russia, Belarus and Kazakhstan.
However, since the beginning of 2014, Polish pork exports have been banned by many countries, including China and Russia. For 2015, in comparison, Poland had exported only 240,000 tonnes of pork, worth US$ 773 million. The slight reduction of the swine herd and unstable pork consumption within the country have only worsened the situation. Experts suggest that Poland today has an excess of 300,000 to 350,000 tonnes of pork per year. This oversupply pushes prices down and reduces the profitability of almost all pork manufacturers.
Some consolation is provided for by a study of the AHDB (Agriculture and Horticulture Development Board) Pork of the United Kingdom, which finds that Polish pork exports to the EU has grown significantly from 52% in 2013 to 83% in 2015. The country has also managed to open a number of export markets, like Singapore and Macedonia, but these are insufficient to make up for the amounts previously purchased by Russia and China.
In 2015 experts from BNP Paribas bank issued a report on the state of affairs in Poland's swine industry, highlighting the acute fall of investment attractiveness.
In a bid to stimulate development of the country's pork export markets, Poland Meat Association Polskie Mięso in 2016 initiated the promotion programme "Let's meat" targeting the global marketplace. With a funding of EUR 1 million till 2018, the programme is expected to open access for Polish pork to new export markets.
However, representatives from the association met a setback when talks with veterinary officials from Canada and Japan were unfruitful.
At the same time, in 2016 Poland's government decided to allocate support to pig farmers. The value of the support will amount to PLN 120 million (US$ 30 million) and would be paid in the form of subsidies of PLN 20 (US$ 5) per head of swine for open-cycle farms and PLN 40 (US$ 10) per head for closed-cycle farms.
The subsidies has been approved by the Agricultural Market Agency of the EU, with the justification for supporting Polish farmers in the context of extremely low market prices for finished products. Most Polish farmers, however, are indifferent to the level of funding provided, suggesting that it should be larger, as the country is in fact acting as a buffer zone for the benefit to the EU, in preventing the spread of ASF.
In conclusion, head of Polskie Mięso Witold Choiński forecasts strong consolidations within Poland's swine industry, since smaller producers are operating with much bigger losses, compared to the largest ones. As a result, within the next few years Poland's swine industry will develop mostly through the efforts of the largest producers.
At the same time, it is also clear that the future of Poland's swine industry will largely depend on the ASF situation. Since 2014, a total of 84 outbreaks involving wild boars have been confirmed in the country, all within a radius of 25 kilometres from the Belarus border. Russian veterinary body Rosselhozndzor suggests that the number of actual outbreaks could be bigger, but this is not supported by evidence.
In a bid to curb further spread of the disease, Poland's ministry of agriculture announced plans to cull 40,000 wild boars in the eastern part of the country. This is despite protests from environmental groups, as the government targets to reduce the density of the wild boar population in the affected area to 0.5 boars per square kilometre, a level which experts believe is sufficiently low to significantly reduce the risk of ASF spreading further.
To provide a reference, similar actions took place in Russia from 2009 to 2012, when veterinary authorities culled boars in central regions of the country. However, these measures appeared to be not very effective, since the disease had continued spreading. Accordingly, the experiences of Russia, Ukraine and Baltic countries have shown that the fight against ASF may take years, with no guarantee for success.
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