NOTE TO THE USERS The medium-term perspectives presented in this publication consist of a set of market projections elaborated on the basis of specific assumptions regarding macro-economic conditions, the agricultural and trade policy environment, weather conditions and international market developments. They are not intended to constitute a forecast of what the future will be, but instead a description of what may happen under a specific set of assumptions and circumstances, which at the time of projections were judged plausible. As such, they should be seen as an analytical tool for medium-term market and policy issues, not as a short-term forecasting tool for monitoring market developments and addressing short-term market issues. This report is based on the statistical information available in May 2001.

This report contains three chapters. The first chapter centres on the market prospects by the year 2008 within the EU and covers the following products: cereals, oilseeds, meat, milk and the main dairy products. Chapter 2 provides a description of the likely prospects of agricultural markets in the ten Central and Eastern European Countries, which are candidates for accession to the EU.

Finally, a presentation of the medium and long-term prospects of agricultural world markets, established by different international organisations and institutes, is given in chapter 3.

We have extracted from this 147 page report the sections that apply specifically to the pig meat sector.

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In the first section we have the Executive summaries from the report. If you would like more detail the second section provides the fulll text, tables and graphs. There is no Executive Summary for Chapter 3 on the World markets.

Executive summary - Pig meat sections

Chapter 1: Prospects for agricultural markets in the EU

After the big increase in production recorded in 1998 and 1999 pig meat production decreased by around -2.4 % in 2000, with a positive impact on producer prices and margins. Production is expected to grow in 2001, and a more substantial increase is projected for the year 2002. Over the medium and longer term, growth rates are anticipated to be lower than in the past.

Pig meat consumption is expected to increase by around 2 % in the year 2001, partly due to the large drop in beef consumption caused by the BSE scare. The medium and long-term outlook for pig meat consumption, is in general positive since pig meat is likely to continue to be favoured by consumers, although clearly less than poultry.

Imports are projected to slightly increase over the medium term, following the increased market access commitments allowed under the double zero agreements. Compared to the record level of 1999, exports decreased by around 100 000 t in 2000 and are likely to be lower in the short term. Exports are then expected to slightly increase over the medium term in line with higher EU production and growing international trade.

Chapter 2: Prospects for agricultural markets in the candidate countries from Central and Eastern Europe

Pig meat is the most important meat produced and consumed in the CEECs, and is expected to continue to be so. After a reduction in production following the Russian crisis, total pig meat production is projected to increase from 4.1 mio t in 2001 to 4.6 mio t in 2008. A significant part of this supplementary production is estimated to be consumed in the CEECs. Per capita consumption in the CEECs is projected to go up from 39.1 kg in 2000 to 42.1 kg in 2008. Higher consumption is expected in all CEECs.

It is expected that the CEECs will be able to continue to be net exporters of pig meat, with the net exportable surplus decreasing from 200 000 t in 1999 to 80 000 t in 2000. A further reduction is estimated for 2001. It should then return back to around 200 000 t in 2008. These net exports should mostly come from Poland and Hungary. These projections are based on the assumption that the producers and processors in the CEECs can overcome most cost pressures and ensure market share domestically and on export markets.

Chapter 3: Prospects for world agricultural markets

There is no executive summary for this chapter, please read the full text below.

Full Report - Pig meat sections

Chapter 1: Prospects for agricultural markets in the EU

In most recent months the pig meat market, like the entire EU livestock sector, has been affected by some extraordinary circumstances that are having major consequences for the short term and are expected to influence the medium-term evolution of the sector.

The new BSE scare in the beef sector, which has started to produce a switch in demand towards other kinds of meat, has partly benefited the pig meat sector and has contributed to further increase prices. After the decrease in production recorded in 2000 (-2.4 % compared to 1999), which followed the period of oversupply and very low prices of 1998 and 1999, the pig meat sector was benefiting of a period of good prices and reasonable margins and, at least in some Member States, there were first signs of investments and increase of the breeding herd.

The recent BSE crisis, like in 1996, is expected to increase pig meat consumption and therefore further sustain the high level of prices. However, among the measures that were immediately put in place against the BSE, the temporary interdiction in the use of animal proteins in pig and poultry feed will probably affect prices of feedstuff and producers’ margins.

Overall, the last pig census that was carried out across the EU between November and December 2000 showed, with few exceptions, a further reduction of the total pig herd. The number of mated sows, however, was increasing almost everywhere, even before the incentives created by the new BSE scare. The relative high price level is expected to lead to a major upward adjustment by pork producers and almost all Member States foresee increasing production by the last quarter of 2001 (40).

However, at the beginning of 2001, the outbreak of FMD in UK and then in Ireland, France and the Netherlands has partially perturbed the pig meat sector. On one side, the animals killed and destroyed for sanitary reasons in the areas touched by the outbreaks will affect current and future production level.

Up to the end of May 2001, around 270 000 pigs have been killed and destroyed in the FMD containment. On the other side, following the FMD outbreak, limitation to the movement of livestock together with a large number of export bans imposed by third countries has created strong disruption in the slaughtering and in the sales.

The important role of exports for the European pig sector makes it extremely sensible to this kind of epidemics. However, the limited spread of the disease outside the UK has prevented major problems and a large part of the export ban on EU pig meat have been removed after few months.

Pig meat production is expected to increase by around 0.5 % in 2001, following the positive developments of producer prices and margins over the last year. However, the big part of the anticipated increase in production will take place in 2002, which is foreseen to reach 18 mio t (+2 % compared to the previous year).

The production increase is then foreseen to slow down in 2003 (+0.9 % compared to 2002), and production should even reduce slightly by 2004. Over the long term, there is a certain scope for further growth, but the growth rates are anticipated to be lower than in the past. Pig meat production, which is assumed to be driven mostly by demand (internal and external) is, thus, projected to resume its growth and reach around 18.8 mio t by the end of the forecast period.

The drop in beef per capita consumption, which has been recorded since November 2000, is expected to have a positive impact on pig and poultry meat consumption. For the year 2001 pig meat consumption is expected to increase by around 2 %.

The medium and long-term outlook for pig meat consumption is in general positive since pig meat is likely to continue to be favoured by consumers, although clearly less than poultry. After the sharp increase in 2001 in connection with the BSE crisis, the growth rates for per capita consumption are anticipated to slowdown somewhat in coming years, given the expected recovery of beef meat consumption and against the moderate prices that are expected following the strong increase in production.

Pork per capita consumption is projected to increase from 43.4 kg in 2000 to around 46 kg by the year 2008.

Table 1.16 - Pig meat projections in the EU, 1999 – 2008 (‘000 t cwe)
	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008
Production (gross)	17993	17563	17652	18006	18175	18152	18368	18646	18706	18850
Import of live animals	0	1	0	0	0	0	0	0	0	0
Export of live animals	2	1	1	1	1	1	1	1	1	1
Production (net)	17991	17563	17652	18005	18175	18151	18367	18645	18706	18850
Imports	55	48	60	58	64	69	73	76	80	84
Exports	1444	1335	1000	1100	1143	1163	1183	1203	1223	1243
Stock changes	-100	-100	0	0	0	0	0	0	0	0
Consumption	16702	16376	16712	16963	17096	17058	17257	17519	17563	17691
p.c. cons. (kg)	44.42	43.44	44.21	44.75	44.97	44.75	45.20	45.80	45.82	46.07
Note: The figures on imports and exports are calculated on the base of the definition of pig carcass weight and exclude therefore offals.

Imports are forecast to increase slightly over the medium term, following the increased market access commitments allowed under the double zero agreements with 10 accession countries. Compared to the record level of 1999 and the remarkable level of 2000, exports are likely to be lower in 2001, due to the export restrictions that followed the outbreak of FMD in Europe. Exports are projected however to slightly increase over the medium term in line with higher EU production and growing international trade.



(40) Danish pig producers have, in general, anticipated the investments and have already increased production (+3.5 % in the first quarter) and, according to market experts, gross indigenous production might reach up to 25 mio pigs in 2001 (+11 % compared to 2000).

Chapter 2: Prospects for agricultural markets in the candidate countries from Central and Eastern Europe

Pig meat is the most important meat produced and consumed in the CEECs, and is expected to continue to be so. During the projection period the balance of pig meat should continue to leave a significant quantity available for export. Despite the Russian crisis in August 1998, production increased during 1999, and the adjustment to the new market conditions were only working through the sector during the second half of 1999 with the full effect only seen in the figures for 2000.

Compared to 1999 total pig meat production is estimated to have decreased by 0.4 mio t (9 %) in 2000. A further reduction of 1.5 % is expected in 2001. The production is expected to return to a growth path as from 2002 and should continue at a yearly average rate of more than 1.5 % until 2008. Total production is projected at 4.6 mio t in 2008. A significant part of this higher production will be consumed within the CEECs. The biggest increases both in absolute figures and in percentage are expected in the two main pig meat producing countries, i.e. Poland and Hungary. In 2008, Poland and Hungary together should produce around 3 mio t, of which 2.25 mio t in Poland. These projections are based on the assumption that the producers and processors in the CEECs can overcome the cost pressures from relatively high cereal and oilseed prices, and the competition on the internal and external markets. Moreover, the projections crucially depend on the development of disposable income, and hence meat demand.

Per capita consumption in the CEECs is expected to decrease in 2000 to 39.1 kg/capita, and return to the level of consumption observed in 1997. This reduction is most pronounced in Poland (from 48.9 to 47.2 kg), Czech Republic (43.6 to 41 kg) and Slovak Republic (from 35.9 to 32 kg). This lower consumption is mainly due to a reduced production within the CEECs, which is not compensated for by increased import. Per capita consumption is projected to increase to 42.1 kg in 2008 or on average by 1 % per year. Increases are assumed for all CEECs due to the continued increase in GDP, which should lead to higher demand for meat.

It is expected that the CEECs as a whole will be able to continue to be net exporters of pig meat. The net-exports were above 300 000 t prior to the Russian crisis. In 2000, the net balance is estimated at just 75 000 t, but after a further reduction in 2001, it is projected to reach 200 000 t in 2008. These net exports will mostly come from Poland and Hungary.

Table 2.12 - Situation and perspectives of the pig meat market in the CEECs, 1999 - 2008
	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008
Slaughtered animals mio	54.1	49.6	47.8	48.7	49.7	50.5	51.4	52.2	53.0	53.9
Slaughter weight kg/head	84	84	86	86	86	86	86	86	86	86
Production mio t	4.54	4.17	4.11	4.20	4.28	4.34	4.42	4.49	4.56	4.63
Total internal use mio t	4.35	4.10	4.09	4.19	4.25	4.29	4.33	4.37	4.41	4.44
Balance mio t	0.20	0.08	0.02	0.01	0.04	0.06	0.09	0.12	0.15	0.20
Per cap. consumption kg/pc	41.4	39.1	39.1	40.0	40.5	40.8	41.2	41.6	41.9	42.1

Chapter 3: Prospects for world agricultural markets

The OECD, FAO, FAPRI and the USDA foresee a medium-term outlook for pig meat characterised by a renewed increase in world production and consumption, and a marked expansion in world trade. The strong competition between exporters, sustained productivity growth and large supplies should however prevent pig meat prices to rise substantially.

World pig meat production is projected to continue to increase moderately over the medium term by between 13 and 17 %, i.e. a slower rate than in previous decades. The pig meat sector recently displayed an expansion of productive capacity and increased productivity. Higher concentration of production in some exporting countries is projected to raise productivity further and reduce production costs. However, pig meat expansion would remain constrained in some regions by greater competition from competitively priced poultry meat as well as by environmental and animal welfare standards. According to FAPRI and USDA projections, most of world production growth (i.e. between 10 and 13 mio t over the next seven years) is likely to occur in China (for around 50 % of total world growth in FAPRI), Canada, Brazil and Mexico. In contrast, production in the US and the EU are forecast to show more modest growth. Pig meat production in Japan is projected to decline, but at a much slower rate than in the previous decade.



The mature pig meat markets in the EU, US, Canada and Japan are expected to record moderate demand growth in line with income prospects and population. Slow consumption growth in these countries would be partially compensated by a stronger increase in Asia and Latin America (notably in Mexico, Brazil and China where total pig meat consumption is set to rise by around 18 % between 2000 and 2008), driven by expectations of low prices and the improvement in the general economic conditions.

Prospects for the pig meat sector in Russia are difficult to assess both on the supply side, where the pace of production recovery should be closely linked to economic reforms, and on the demand side, with consumption growth associated with an uncertain economic outlook and income distribution issues. The FAPRI, FAO, OECD and USDA foresee an expansion in Russia’s import demand for pig meat due to the slow recovery in pig meat production (if not a further decline) that would remain restricted by structural problems (small size units), limited availability of feed grains, and infrastructure and institutional constraints. In contrast domestic demand would continue growing as economic prospects improve modestly. Pig meat net imports would rise over the whole projection period and reach 400 000 t by 2008, i.e. a 100 000 t increase.

Global trade in pig meat is forecast to increase further over the medium term with growth rates ranging from 17 % in the FAO projections to 26 % in the FAPRI outlook and 29 % in the USDA projections (i.e. by around 600 000 t of additional imports from 2000 to 2008). Over the forecasting horizon, growth in pig meat trade would be mainly driven by strong demand in major importing countries of Asia (notably Japan and China), Russia and Mexico.

Japan would remain the largest pig meat importer over the outlook horizon, with net imports amounting to about 1 mio t. However, the pace of import growth would significantly decline as compared to the previous decade thanks to the slowdown in the contraction of domestic output. Growing population and improved income levels should boost Mexico’s import demand according to the FAPRI outlook as domestic production would be constrained by infrastructure and distribution problems. Conversely, the USDA and OECD projections suggest that the pig meat sector in Mexico should benefit from on-going restructuring driven by the NAFTA agreement. Improved technology and better integration and co-ordination of operators would enable Mexico to raise pig meat output and exports, only restrained by relatively high feed costs.

Table 3.9 Outlook for pig meat net imports for major importing countries, 2000–2008 (‘000 t cwe)
	2000		2008		Change in Trade
	USDA	FAPRI	USDA	FAPRI	USDA	FAPRI
Japan	880	880	1034	950	154	70
Russia *	500	299	601	408	101	109
South Korea *	140	110	129	42	-11	-68
Mexico	95	95	144	209	49	114
China - Hong Kong *	154	220	210	266	56	46
USDA: * Gross trade

Taiwan imports are forecast to rise over the medium term as the increase in consumption is expected to outpace the growth in domestic production that would remain largely below the pre- FMD levels. Owing to the FMD outbreak in 2000, South Korean exports fell, notably to the remunerative Japanese market, prompting a decline in import levels as domestic production remained on the South Korean market. Over the medium term, South Korean exports resume growing, generating a fall in total net imports.

The OECD, FAO, USDA and FAPRI foresee that the increasingly export-oriented and low-cost producing pig meat industry of North America should capture most of the sustained rise in world pig meat trade. Significant restructuring, through concentration and vertical integration, and improved productivity in the production, marketing and processing sectors of the pork industry is expected to boost North American, notably Canada’s, competitiveness. However, new exporting countries are emerging on the world pig meat market, in particular Brazil, Mexico and South Korea. These countries would gain market shares at the expense of the EU, the world’s largest pig meat exporter, whose pig meat exports would stagnate over the medium term.

If pig meat prices are generally expected to rise over the medium term, the magnitude of this recovery should remain largely constrained by the continued efficiency and productivity gains in feeding practices, increased competition from other meats and the emergence of new exporting countries.