"Most" European Union countries are not complying fully with
a ban on sow stalls, Rabobank said, as officials threatened legal action
against states flouting the curbs, which are expected to fuel a further drop in
the bloc's pig herd.
The outlawing at the start of the year for EU pig producers
of keeping pregnant sows in gestation crates, or stalls, which limit drastically
animals' free movement has been ignored by much of the industry, Rabobank said.
"Due to the absence of measures to stop the trade in
illegally-produced piglets and pork, and the lack of clarity from the EU as to
how the bank would be controlled, many breeders took the risk to continue
production even into 2013" using the illegal technique.
This has meant "most countries" in the EU "not being fully
'Closing down farms'
The caution comes as the European Commission is preparing
legal action against countries which have not met the January 1 deadline, with
producers in states including France, Germany and Spain among those believed to
be showing low rates of compliance.
"It's now up to these countries to take action, and in some
cases that means closing down whole farms," a commission source told Reuters,
the news agency.
This may mean a 5% drop in EU pig production by 2014,
Commission officials said in October.
Rabobank forecast a drop of "about" 3.5% in the EU sow herd
this year, although this would be no faster than the average pace of decline
over the last five years.
With productivity improving, this will overall see a
1.5-2.0% drop in pork output.
'Benefit of futures'
The decline in output contrasts with a stable pig herd in top
producer China, "very different from prior cycles, when inventory would fall
during periods of poor profitability", Rabobank said, attributing the population
resilience to industry consolidation.
"The change indicates that large-scale farming has expanded
quickly at the expense of smaller farms, improving market stabilisation."
However, it is the US, where farmers have expanded their sow
herds a fraction, which the bank singled out as having the brightest prospects
among large producing nations, in part thanks to the presence of Chicago lean
hog futures, besides grain derivatives.
"Producers in the US, who have the benefit of using futures
markets to manage risk, have fared much better than producers elsewhere," Rabo
Furthermore, US producers faced less cost pressures in some
"Relatively, we see the US gaining in competitiveness as
labour costs rise rapidly in China and Brazil, and Europe continues to increase