Pig production opportunities in Central and Eastern Europe Barriers and possibilities April 2014, Willy Baltussen and Robert Hoste

Increasing world population + 30% people UN Census Bureau “Global demand for meat, milk and eggs is fast increasing, driven by rising incomes, growing populations and urbanization” (FAO, 2006).

Demand for pig meat in EU hardly growing  Increasing demand for pig meat is expected ● 113 kton (2013) to 126 kton (2021) (OECD, 2012)  Possibilities for EU market are limited because: ● It an internal market; ● Population is not growing; ● Consumption of pig meat is at an saturation level in many EU countries; ● More people are eating only 4 or 5 days a week meat  decreasing consumption per head ● +1% production between 2013 and 2020 (EC, 2011)

Stable self-sufficiency in the EU  Self sufficiency of pig meat in EU is around 110%  Since 2000 this increased a little from 103%  Main export countries for EU pig meat are China, Japan, South Korea, Russia, Ukraine, Belarus.  Imports to EU are (still) almost zero due to border levies and non compliance in issues like traceability

Pig meat production, export and consumption in the EU (in mln tonnes) Source: EC, 2011

Pig production costs in main EU countries and world market players (in € per kg) Source: Hoste, 2013 (based on InterPIG, year 2011)

Piglet production needs focus Source: Hoste, 2013 (based on InterPIG, year 2011)

Relative production cost differences Important differences for production costs of pig meat in the world are:  Feed costs;  Labor costs;  Performance (compensates partly high feed and labor costs in EU compared to Brazil and US);  Societal demands (e.g. environment and animal welfare);

Competitiveness in pig industry  Additional costs for concentration of the pig industry are still less than the benefits of concentration (sourcing materials, innovation, knowledge exchange, economies of scale in feed, slaughtering and processing)  Two factors are decisive in location of meat industry in Germany: ● Low labor costs because of a lack of minimum hour rates; ● Big home market with critical consumers (discount versus craft butchers).  For pig fattening the situation differs from piglet production, slaughtering and processing.

Barriers in NW-Europe  Environmental problems due to high density of people and animals;  Reduction of societal acceptance: ● mental distance to production; ● focus on 2 nd (processing) and 3 rd level (service) production; ● Ethical questions (like animal welfare).  High demands on food safety (‘zero risk tolerance’) ● GMO’s, ban on meat-and-bone-meal, ban on growth promoters; ● Reduction of the use of antibiotics in husbandry

High costs for societal demands (in eurocents per kg slaughter weight) Source: Hoste, 2013

Possibilities to increase pig fattening in Central Eastern EU Member States For pig fattening the situation differs from piglet production, slaughtering and processing. Main reasons are:  Less knowledge needed but high labor input;  Need of feed;  Relative high capital need;  Relative high environmental pressure.

Development pig industry EU-15 versus EU-12N [2001= 100 (production); 2005 =100 (breeding)] Source: GIRA

Decreasing pig production in Central Eastern Europe  bad structure of primary pig industry: a lot of backyard production especially in Romania;  Lack of good infrastructure: genetics, feed, veterinarians, equipment, traders, transport, slaughterhouses, processing industry;  Continuous increasing demand regarding quality, hygiene standards, labelling, endemic diseases and contagious diseases from government and retail;

How to improve the situation?  Raise the bar: good producers;  Focus on fattening of pigs;  Increase support by a diversity of companies  Ultimate goal: reach high quality products for the local market and deliver to the western EU market.

Barriers to improve the present situation  Financing investments;  Control of disease situation;  Quality of management (awareness, knowledge, people management);  Quality of housing, feed, animal health care...;  Cooperation model in the supply chain (inclusive trust).

To conclude  Good external circumstances for pig fatting in Central Eastern Europe;  Pig meat is a highly competing and saturated market in EU;  There are barriers to expand in Central Eastern Europe (finance, knowledge, chain cooperation).  With Western style management and equipment competing cost prices can be realised.

Thanks for your attention! Questions???

Production costs in some C/E European countries, based on western style management Source: Hoste et al., 2007