December 4, 2007

 

US pork group "deeply disturbed" on EU's export refund programme

 

 

The National Pork Producers Council, or NPPC, says it is "deeply disturbed" by the European Union's decision to reintroduce export subsidies for pork, which were initiated Friday (November 30).

 

The EU Management Commission voted last week to introduce export refunds for fresh and frozen pork due to difficult market conditions for its swine producers. Higher feed costs and a disadvantage in the world markets because of the sharp drop in the value of the US dollar led the Commission to reintroduce the export refund.

 

The aid package will provide EUR31.1 per 100 kilograms for carcasses and EUR19.4 per 100 kg for pork bellies, according to a Dow Jones Newswires story from London on Friday.

 

In a press release issued Monday, the NPPC said the action by the EU "is particularly disappointing in light of the political commitment it made to end export subsidies on pork and other agricultural products as a part of the World Trade Organization's Doha Round negotiations."

 

NPPC president Jill Appell called the EU subsidies "a direct blow" to US pork producers. "Our profitability is increasingly dependent on our exports. The EU subsidies undermine the US pork industry's hard-earned export sales and will unfairly shift financial pain to our producers."

 

US pork producers, like pork producers in the EU and most other countries, are in financial turmoil due to very high feed prices and relatively low live hog prices, the NPPC's release said.

 

Some market analysts said the EU's pork export refund programme could be at least mildly bearish for US pork sales internationally.

 

Glenn Grimes, agricultural economist at the University of Missouri, said the EU's refund programme will be "somewhat negative" for US pork exports. He sees the impact mainly on frozen exports, but little or no effect on sales or prices for the fresh-chilled products. The majority of the higher valued cuts shipped to Japan, Canada and other leading international customers is fresh-chilled pork.

 

Regarding the EU's decision, "it's understandable that they want to throw a lifeline out to their pork producers," said Greg Wagner, director of marketing and risk management at Horizon Ag Strategies in Chicago. "I would expect it will nibble at the margins for (US) exports. Essentially, it contributes to the overall psychological bearishness of the industry at the present time," he said.

 

Dan Vaught, analyst with A.G. Edwards & Sons in St. Louis, predicts the EU export refund programme won't have much impact on US pork exports or prices. He says most of the US pork exports go South and West, so there is not much direct competition from the EU where the majority of US pork exports are sold. "However, it may make European (pork) product more competitive, which in turn might boost US imports. Ultimately, however, my first guess would be that it won't greatly affect US prices."

 

According to US Department of Agriculture data, US pork imports from the EU for the first nine months of 2007 amount to 32,222 tonnes and make up about 12.5 percent of the total. The majority of pork imported by the US comes from Canada.