European Union-Farm Report.

EUROPEAN UNION-FACTS AND FIGURES ON FARMING.

Declining EU milk prices and relatively high carcass prices are expected to

increase slaughter this year. As a consequence, the EU cattle herd is forecast

to resume its long-term trend of contraction during 2009, according to a U.S.

Department of Agriculture attache report posted Wednesday on the Foreign

Agricultural Services Web site.

The elevated supply of pork in 2007, in combination with EC funding, boosted

EU pork exports in 2008 to a record level of 1.7 MMT. As a result of tight

margins, pork production declined in 2008 and is not expected to recover in

2009.

Executive Summary

Cattle & Beef:

Induced by the high milk and beef prices, the EU cattle herd increased during

2007 and 2008. The herd is expected to have reached its peak size by the end

of 2008. Due to reduced slaughtering and restricted imports from Brazil, EU

beef supply tightened during 2008. Despite the limited supply, EU exports

rose, fulfilling the increased demand in Russia and Switzerland. This year,

slaughtering is expected to increase as a result of declining milk prices and

relatively high carcass prices. As a consequence, the EU cattle herd is

forecast to resume its long term trend of contraction during 2009. Due to the

increased slaughtering and to a lesser extent, recovering imports, beef supply

on the EU market is expected to expand, benefitting domestic consumption. As a

result of the financial crisis, EU beef exports are expected to decline in

2009.

Swine & Pork:

During 2007 and the beginning of 2008, margins in the swine sector shrunk due

to the high feed prices and oversupply of pork. Lower pig production and

slaughtering during the course of 2008 eventually lead to higher carcass

prices. As margins are expected to increase only moderately, a recovery of

pork production is not expected in 2009. The elevated production of pork in

2007, in combination with EC funding, boosted EU pork exports in 2008 to a

record level of 1.7 MMT. With a lower supply of pork and the financial crisis

affecting demand on the main export markets, EU exports are anticipated to fall in 2009.