October 3, 2012
EU beef prices at record levels for 2012
EU's beef prices have reached record levels for 2012 while near-record pork prices are also seen throughout most of this year.
According to Rabobank Food & Agribusiness Research and Advisory, similar price levels have not been seen in the EU since the severe disease outbreaks of bovine spongiform encephalopathy (BSE) in late 2000 and foot-and-mouth disease in early 2001.
Rabobank's research suggests supply of both cattle and hogs will remain tight both in the EU and globally until at least 2013 and that this low production will lead to a continuation of elevated prices.
EU meat industry margins have been pressured in recent years due to its inability to fully pass on the rising pork and beef prices. With feed costs nearing 2008 records, the main question is what EU beef and pork production and resulting prices will be in 2013 and 2014.
EU pork prices for January-September 2012 averaged EUR 1.67 (US$2.15) per kilogramme carcass weight equivalent, EUR0.20 (US$0.26) above the 2004-2011 average. This resulted from the decline of 2.5 million head in the sow herd between 2006 and 2011, in turn caused by low profitability in recent years due to high feed costs and by high piglet prices (up an average of 25% compared to Jan-Sept 2011 prices).
Rabobank predicts a further 2% decline in pork production in 2014 as smaller producers of piglets are expected to cease production due to the EU sow stall ban. In addition, expansion at remaining producers will be hampered by the current high feed costs and an export demand that will remain strong.
Similarly, EU beef export demand surged since the end of 2010 after low global beef availability and the opening of the Turkish market for EU beef. The unexpected strong price upswing resulted in record beef prices, above EUR4.0 (US$5.16) per kilogramme since May 2012. Tight supplies are almost solely responsible for the on-going strong price levels in 2012. Together with an international supply capacity that is expected to be further pressured, EU beef supply will remain tight into at least 2014.
