The outbreak of FMD in Germany, just outside Berlin, has given the agricultural sector in Europe a big shock. At the moment, much is still unclear and the main thing is to hope that the infectious animal disease will not spread any further. In the meantime, sentiment on the meat and dairy markets has taken a hit. German cattle prices, which were on their way to a new record, took a U-turn at the beginning of this week. And South Korea, for example, has already stopped importing German pork, just like the UK. The consequences on the dairy markets are even less concrete, although the German Milch Industrie Verband (MIV) is rightly very concerned.
German cattle prices, which were on their way to a new record, took a U-turn early this week. And South Korea, for example, has already stopped importing German pork. The consequences on the dairy markets are even less concrete, although the German Milch Industrie Verband (MIV) is rightly very concerned.
When FMD is mentioned, many people in the Netherlands automatically think back to 2001, when the disease spread rapidly and drastic measures were taken to contain the infection. Fortunately, such a scenario is not yet concretely in the pipeline above the market, although the measures taken (transport bans, companies closed, blood sampling from animals) are certainly not exaggerated. Further spread could be a major disaster for the entire animal agrofood cluster, from farmer to meat exporter and from livestock transporter to dairy trader.
South Korea takes measures
The good news is that the virus (serotype O) has only been detected at the water buffalo farm in the German state of Brandenburg for the time being. At the same time, the damage to German meat and dairy exporters has already been done, because the country has lost its FMD-free status. For example, South Korea immediately stopped importing German pork. Shipments that have been in transit since December 27 must also be checked for the virus. In addition, the UK has temporarily suspended imports of German dairy and meat.
Market leader Tonies saw the storm coming and had already warned about this a few hours after the outbreak was established. Such protocols come into effect immediately, as the company knows after unpleasant experiences with African swine fever, which has been hampering exports for years. Other Asian countries, such as Japan and the Philippines, may follow the Korean example in the coming days. The Chinese market was already closed to German pork, due to ASF.
Trend break for German cattle prices
The prices of German slaughter bulls in North Rhine-Westphalia fell again at the beginning of this week, after a period of continuous price increases. This is remarkable, because the German cattle prices were on their way to equal the record level of just under €6 per kilo in 2022 within a few weeks due to a persistent tight supply. For the time being, the fear of the FMD outbreak is still there, although the first price drop was limited. It is difficult to estimate how the market sentiment will develop further.
MIV: Consequences impossible to predict
This also applies to the situation on the (German) dairy market. The majority of German milk processors are highly dependent on export. About half of production is exported, of which 18% to countries outside the Eurozone, according to a statement of MIV. Milk and whey powder in particular are major export products on the world market. The economic consequences of export restrictions are therefore incalculable, although no bans have been imposed at this time. According to the German Minister of Agriculture, trade with other European member states remains possible, although there are signals from the market that European processors are currently making it difficult to receive German cream or concentrate, for example. Outside the Eurozone, the situation is more complex. German dairy exporters conclude export certificates with buyers. If provisions are included there regarding FMD-free status, the German authorities can no longer issue the certificates. The consequences for the market and milk prices are then easy to guess.
The German Ministry of Agriculture is currently investigating whether it is possible to regionalize the FMD outbreak. This would mean that dairy products from unaffected states would be guaranteed FMD-free. However, this sounds easier than it seems. Around ASF in Germany, this has also been attempted to regain regional access to China, but still without success.
Green Week
The coming weeks and months are crucial. If it remains at that one outbreak in Brandenburg, the tense situation in the market may ease again. However, if the virus spreads further to other agricultural companies, German states or even other European member states, the consequences will be more far-reaching. It is therefore understandable that some in our country are reluctant to travel to the Grüne Woche in Berlin next weekend.