The prevailing challenges facing the European pig sector are familiar across all livestock sectors - an increase in the volume of meat available and a volatile export market influenced by exchange rates and market access.
According to the latest analysis by Quality Meat Scotland (QMS), European pig slaughterings in the first quarter of 2015 were almost two percent higher than last year and the volume of meat produced rose by about three percent.
“The loss of export markets in Russia in February 2014 resulted in EU pigmeat exports falling by five percent during 2014 despite growth in exports to other countries, particularly China, Japan and South Korea,” observed Stuart Ashworth, QMS Head of Economics Services.
With Russia still excluding EU pigmeat, the growth in sales to other markets is vital to maintaining demand, he said. However, the mix of products demanded, the balance of fresh and frozen and recovering production in the United States means that, although exports may be maintained in volume, the market is increasingly competitive and the financial value can vary significantly. Notably, European export competitiveness has been boosted by a fall in the value of the euro against the US dollar.
“The expectation is that EU slaughterings will fall below year-earlier levels in the second half of 2015, at which time the pigmeat in store will come back onto the market,” said Mr Ashworth.
“History tells us that pig prices would be expected to rise between now and late summer and a forecast of lower volumes would support this expectation.
“Carefully managing the removal of frozen pigmeat stored under the recent aid scheme, which must occur in most cases after 90 days of storage, will be important in maintaining some stability in the market.”
The European Commission was persuaded to introduce private storage aid for a limited period to support the market, after European pig prices had fallen to a point where they were some 18% lower than last year, at the beginning of 2015.
This scheme, which pays for the freezing and storage cost of a selection of cuts has now ended, having taken almost 64,000 tonnes of pigmeat into store.
The evidence, in terms of the movement of European pig prices, is that this introduction of private storage aid achieved its objective of supporting the market, said Mr Ashworth.
“From a low of around €1.30/ kg dwt (£0.94/kg) in late January, prices rose to around €1.47/kg dwt (£1.07/kg) in late April when the scheme closed. However, the aid scheme has now ended and prices have slipped to €1.41/kg (£1.02/kg),” he said.
UK producers did not see so much benefit, however, observed Mr Ashworth.
“UK pig prices are well above the EU average and during the period of private storage UK pig prices quoted in Euro remained broadly steady at around €1.80/kg (£1.31/kg).
“This left prices, in Euro terms, 6.5% lower than last year. The challenge here of course is that Scottish producers do not get paid in Euro but in Sterling and in Sterling the price is down more than 20% leading to some nervousness among producers.”
On the plus side for producers, he noted that feed costs have fallen back sharply for a second year. Feed wheat is down 35% year-on-year and by nearly 50% from 2 years ago. Meanwhile, soyameal is around 15% cheaper to buy than in May 2014 and 20% lower in price than two years ago.
Across Europe as a whole, despite the influence of private storage aid, prices remain almost 14% lower than a year ago, with the major pigmeat producers seeing falls of at least 10% - in Spain’s case 20% back on the year.
“Perhaps not surprisingly Spain has been a large user of the support scheme while the UK put very little pigmeat into store.
“Clearly, therefore, the aid scheme has offered some support to prices in that they have regained some ground over the period it was open.
“However some countries, for example Spain, while grateful for an improvement in price of 16% over the time the scheme operated, will still be concerned about a current market price that remains so much lower than last year.”
*The prices quoted by Stuart are in €/kg dwt. If you would like a sterling price in brackets next to the euro price (at current exchange rate) they would be: