UNITED KINGDOM, London. The UK has a large pork production shortage; only half of national demand is covered by national production. However, production is growing. Since 2010, production has increased by more than 100,000 t to almost 900,000 t cwt.
This extra production is partly intended for national consumption, but there are also increasing exports. British exports increased by 50,000 t to reach 255,000 t cwt in 2017(mainly cuts), reaching a value of € 520 Mill. Over 30% is transported to third countries. Ireland is the UK’s most important export destination in the EU market, followed by Denmark and Germany.
Denmark, the Netherlands, and Germany are the most important suppliers, followed at a distance by Ireland and Poland. The value of British imports in 2017 was € 2.79 bn. Nearly half of those imports are fresh or frozen meat. Additionally, there is a wide range of sausages and other processed meat products that represent 30% of imported volumes, while bacon products represent the remaining 20% of imports.
Denmark mainly supplies fresh meat to the UK (68% of total volumes). This is mainly related to the meat processing industry in Danish hands (Danish Crown’s Tulip) and to years of presence in the fresh meat segment. The Netherlands supplies 45% of English bacon imports, and Denmark delivers 20%. Ireland and Poland are the main suppliers of sausages and other processed meat products.
Based on preliminary estimates for 2018, the EU has a self-sufficiency rate of nearly 112%. After Brexit, the EU-27’s self-sufficiency will rise to rates between 117% and 120%.This means that, in the future EU-27, pork processors will need to work ever harder to secure opportunities for exporting pork meat and by-products that are not consumed within the EU-27.
Trade between EU member states is also very dynamic, especially from countries with surplus production to countries that do not produce enough to meet national demand. Different economic characteristics like labour costs, recent investments, and consumption habits influence these intra-EU trade flows.
Rabobank’s view is that China's pork imports in 2019 will increase sharply to compensate for some of the fall in production as a result of African swine fever. Chinese imports are expected to equal or exceed the volumes observed in 2016. The EU is well-placed to benefit from this increased demand in imports, which could continue for several years.
Without knowing the outcome of the Brexit negotiations, it is difficult for companies to prepare for the future. A ‘hard Brexit’, with border-control for EU member states, could encourage companies to export more to China. This will mainly concern frozen products, i.e. about half of current total UK imports. Such a scenario will most likely attract larger exporters, and, as a result, smaller exporting companies could get a better position in the UK market.
Further alternatives for the UK market supply are Imports from non-EU countries. The UK applies strict animal welfare requirements. In the short-term, it seems unlikely that countries like the US or Canada can supply the UK, but North American suppliers are certainly not excluded in the medium-term. Another alternative is an acceleration of production growth in England due to better pig prices and good profitability at the national level.