BPEX explains why pigmeat storage impact is proving so “limited”

Private Storage Aid (PSA) for EU pigmeat, which came into force on March 9, appears to have had “little impact” on the EU market, according to BPEX.

“By mid-April, requests for PSA had reached over 50,000 tonnes but new applications were down to around 5,000 tonnes a week,” said BPEX. “To put this into context, EU production during March and April 2014 totalled around 3.6 million tonnes. Even allowing for some extra applications in the remainder of April, the quantity covered by the scheme therefore represents only around 2% of production.”

In seeking to explain why the current scheme is proving less worthwhile than either of the four similar schemes run in 2002-03, 2003-04, 2007 and 2011, BPEX focused on the lack of belief in business circles that prices will be better by the time stored product is ready for release

“In most previous cases, PSA schemes were introduced to deal with temporary disruptions,” said BPEX.  “In some cases this related to trade tariffs and in others to health issues. In these cases, there was a clear expectation that market conditions would be better by the time product was released from storage.

“The present scheme was brought in due to persistent low pig prices following the Russian import ban. However, there appears to be little prospect that the ban will be lifted, or even eased, during the storage period. Therefore, barring some seasonal improvement, market conditions may not have improved when product is released.

“This has limited the volumes stored, which have been only around half of those in previous schemes. Rates of aid are also reported to barely cover costs and so are not providing any financial incentive to store product. In addition, the products included are not the ones most affected by the Russian ban, limiting the benefit of removing excess supply from the market.”

In relation to this last point, Copa-Cogeca, speaking on behalf of Europe’s farmers and farm cooperatives, is reported to be pressing Brussels to extend the current PSA to include fat and lard. This is in line with the fact that, along with offal, fat and lard made up nearly half of pigmeat exports to Russia before the country’s import bans were introduced last year.

See full BPEX report

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