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A Comparison Between Pig Farming in the Eurnn-N Union and North I

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ir. M.A.H Vaessen A comparison between pig ir. M.A.C. Bastiaansenl dr. ir. G.B.C. Backus farming in the Eurnn-ndm. vrv-I I 1 ABN AMRO Union and NorthI America Add ress: PO. Box 83 ABN+AMRO 5240 AB Rosmalen 11 The Netherlands tel (+31) 73 528 65 55 fax (+31) 73 521 82 14 Report P 5.6 April 1998 ISSN 1385 - 5883 CONTENTS SUMMARY 3 INTRODUCTION 5 PIG FARMING IN THE EUROPEAN UNION 6 5.1 Production and consumption 6 2.2 Trade and export 6 2.3 Sector structure in the European Union 8 2.3.1 Primary farm business 8 2.3.2 Slaughterhouses, processing industry and retail 10 2.4 Cost price and output prices 11 2.5 Other developments 12 3 PIG FARMING IN NORTH AMERICA 14 3.1 Production and consumption 14 3.2 Trade and export 15 3.3 Sector structure in North America 15 3.3.1 Primary farm business 15 3.3.2 Slaughterhouses and processing industry 18 3.4 Cost price and output prices 18 3.5 Other developments 19 COMPARISON BETWEEN PIG FARMING IN EU AND US 21 4.1 Similarities 21 4.2 Differences 21 4.3 Developments 21 4.4 Strong and weak points 22 4.5 Conclusions 22 5 CONSEQUENCES FOR DUTCH PIG FARMING 24 0 Research Institute for Pig Husbandry, Rosmalen 1997 NO part of this book may be reproduced in any form, by print, photoprint, microfilm or any other means without written PermiSSiOn from the publisher. 2 have a market share of more than 53%. producer is relatively weak in the US. The The overall tost price in the US is considera- “market power” in the chain is with the bly lower than in the EU, despite more unfa- slaughterhouses. There are also differences vourable technical results, and is almost $ 1 in sales. US sales focus more on bulk pro- per kilogram of liveweight, which comes ducts with a Iow tost price, whereas the EU down to approximately $ 1.25 per kg of produces relatively more for market seg- slaughterweight. In a comparison of the US ments, such as bacon in the UK and Parma and the EU the dollar exchange rate is ham in Italy. therefore important. Besides a Iow tost price, the US also has Iow output prices. The The following conclusions can be drawn. average output price in the past 6 years was The competitive power of the US on the approximately $ 1.05 per kg of liveweight. world market is currently stronger than that of the EU. Both the EU and the US show a tendency Cost price differences between the US towards increase in scale. Moreover, pig far- and the EU will become less the coming ming is more and more concentrated in years. some important production areas, which Initiated by GATT/WTO agreements and results in environmental problems in these an increasing pork consumption in particu- areas. There is also an increasing concen- larly Asia world trade will increase. tration of slaughterhouses/processing indus- US export will remain to be aimed at try in both areas. In the US this process has cheaper bulk products, which can be pro- proceeded further than in the EU. duced at a structurally lower price. For Pig farming in the US is more landbound. the EU there are opportunities for the so- The EU is more advanced in environmentally called value added. To take advantage of investments. The US has only recently start- these opportunities a far-reaching chain ed to solve environmental problems, which integration is necessary, in which different are mainly problems with respect to stench. chain stages cooperate closely. Contrary to the EU, animal welfare is hardly By increasing world pork consumption and an issue in the US. a relatively strong competitive power of pig The technical results in the US lag behind farming in the EU as well as in the US, pig compared with the EU. Because of the avai- farming in both areas can increase in the lability of cheap materials there is less atten- future. tion for result improvement. Despite worse The Netherlands should focus more on technical output, tost price in the US is products with a higher value added in a structurally Iower. The US production chain chain-oriented organization. All this cannot is characterized by a strong vertical integra- prevent a decrease in the number of pigs tion, while the EU structure is relatively frag- as well as farms in the Netherlands in the mented. The chain position of the primary years to come. 1 INTRODUCTION As far as world production of pigmeat is con- Besides the above-mentioned developments cerned, China proves to be the largest pro- in the sector structure, economie relations ducer with 36.4 m tons of pork. In the Euro- change by, for example, liberalization of pean Union (EU) and the US production was world trade (GATT/WTO). In the coming 16 and 7.8 m tons respectively in 1996. years this may lead to new competitive posi- World population of pigs is approximately tions on existing markets. To what extent 750 m pigs, accounting for 73 m tons of GATT/WTO agreements lead to changing pork. Consumption per head of the world po- import/export relationships between the EU pulation is approximately 28 kg of pork. The and North America partly depends on struc- past few years this consumption has in- ture developments in pig farming in these creased by only about 1% per year while areas and relative prices of materials that total world consumption has increased by can be expected et cetera. 2-3%. Aim of this study was to evaluate these Despite its high production, China exports developments for the EU as well as for the only an extremely limited part. The two most US and to draw a picture of their conse- important actors on the world market are the quences. The study was carried out as a EU with an export of approximately 850,000 joint project of the Research Institute for Pig tons and the US with a 400,000-ton export. Husbandry and the ABN AMRO BANK NV. Total world trade is about 2.8 m tons, which The sector structures in both the EU and makes these two areas account for about North America were considered, while for 45%. North America emphasis was placed on the US. For both areas the strong and weak The US part in world trade has rapidly in- points have been evaluated. Factors such creased recently. This was also clear in as production conditions, tost price, con- 1997, since there was a lower meat supply sumption and environmental factors play an in the EU, particularly due to the Classical important role in this. Moreover, structure of Swine Fever outbreak in the Netherlands. the processing industry and market are of That is why it is interesting to compare these utmost importante. two “pig areas” of the EU and US. Chapter 2 considers the structure and In the EU as well as in North America (US general developments in pig farming in the and Canada), pork production is increasing- EU, after which chapter 3 discusses North ly taking place in a limited number of areas American pig farming. Chapter 4 first deals with a high pig density. In North America, a with the strong and weak points for both development towards an industrialized pig areas, and then provides the conclusions sector is becoming apparent by the building and recommendations for pig farming in the of ‘megafirms’. Also in the EU an increase in EU. The final chapter describes the conse- scale in pig farming can be seen. The num- quences and desired direction of develop- ber of pigs is increasing while the number of ment for Dutch pig farming. firms is decreasing. 2 PIG FARMING IN THE EUROPEAN UNION This chapter considers the pig farming struc- lands increased if compared with 1995. In ture in the European Union (EU). In 1996 pro- the other countries there was a decrease in duction was over 16 m tons of pork, nearly pigs, the largest of which was in Portugal 850,000 tons of which were exported. and Germany. From the table can be con- First a few general parameters are given, then cluded that Germany, Spain, France and the trade and export, sector structure, output Netherlands have the largest numbers of prices and tost price are considered. Lastly, pigs. It also becomes clear that France has a few other developments are described. surpassed the Netherlands as to numbers of pigs. The past few years France and Den- 2.1 Production and consumption mark particularly have increased production. Table 2.1 shows the number of pigs, produc- Table 2.3 presents production, consumption, tion, number of slaughterings, import, export per capita consumption and the self-suppor- and per capita consumption in the EU for a ting rate for different EU countries. From this number of years. From 1990 to 1996 con- table becomes clear that Denmark has the sumption only slightly increased. By way of highest self-supporting rate and therefore illustration, increase in world consumption depends on export the most, after which the per capita was over 5% per year in the Netherlands and Belgium/Luxembourg fol- same period to approximately 28 kg in 1996. low. In recent years France has developed From 1990 to 1996 EU production increased itself from a net importer towards a net ex- by 2% per year, so that the self-supporting porter. Production and total consumption are rate increased.
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