European Union pork industry on threshold of changes

As global demand for pork rises, EU hog prices are failing to keep pace with the US, Canada and Brazil. A new Rabobank Industry Note examines two main questions: are EU price declines structural and, if so, how will this impact the EU pork industry in the coming years?

The main findings are:

• EU pork production could decline by 1.2 million tonnes over the next decade due to the combined impact of financial impediments in the EU pork industry, more expensive regulation, and the EU opening up for pork imports.
  
• The expected decline in EU pork production will change the industry landscape, with supply security becoming more important than price. This development will inevitably lead to further consolidation of the EU pork industry, both horizontally and vertically, and will result in the emergence of two different company models: large forward-integrated companies with strong farmer relationship and smaller companies supplying local retail, foodservice and processing companies or a special market segment.
  
• For slaughter and processing companies supply security will become more important than price.
• Growing export opportunities in China and some other markets will help to offset some of the burdens.
• Further consolidation in the pork industry is inevitable.
• Five criteria will be key to success as two business models emerge: management skills, the company's core competence, supply relationships, supplier structure and the market segment.