European Prices Tumbling

With feed prices dropping and consumer demand keeping prices uncharacteristically strong in October, US producers are enjoying the prospects of continued profits, even if PEDv may increase seasonally.

However, the news from Europe isn’t so good. Pork prices are in a free-fall, mostly related to the Russian embargo of all EU pork products. The embargo is related to the on-going fighting in Ukraine and the EU’s stance against Russian intervention and has little if anything to do with food safety, product reliability, etc.

Outside of other EU countries, Russia was the largest foreign market for Germany pork products. With the EU opposing Russian intervention in the Ukraine, Russia has retaliated by stopping all imports of pork products from Germany and other EU allies. Because EU pork traditionally is not cost competitive in other foreign markets (think Japan, China, Mexico) with US and Canadian products, coolers have filled rapidly with product. With coolers full, wholesalers are having to unload pork at what some consider fire-sale prices within the EU. This means economic disaster for European producers who have higher costs of production than US, Brazilian and Canadian counterparts.

The economic troubles of European producers who are suddenly faced with glut of product in their market driving down prices highlights the dangers for US and Canadian producers. Canada exports more than 50% of the pork they producer and the US about 25%. If something would happen to our export market such as a foreign animal disease or a serious trade dispute with a trading partner we could face the same sudden drop in market price as our economies would be forced to absorb all of the product we produce so well.

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