1st November 2013

Pig prices hold firm as pigmeat imports fall and exports rise

Current pig producer prices are well ahead of last year but the degree of increase has fallen to around 9%, compared to the 12% year-on-year increase seen in early August, according to Stuart Ashworth, Quality Meat Scotland’s Head of Economics Services.

“Across the UK, pig slaughterings have modestly changed from last year,” said Mr Ashworth. “However, with carcase weights increasing, so does production.

“This means that the steady increase in producer price seen over the past twelve months points to an underlying strength in the market.”

That strength in the market has been aided by firming prices across Europe over the first half of 2013, making the UK market less attractive to European suppliers and subsequently impacting imports, which have declined by 4% so far this year.  Conversely, however, the UK was able to increase its exports.

“The net effect of this trade meant that the quantity of pigmeat on the home market fell by 3% over the first half of the year encouraging price rises,” said Mr Ashworth.

“More recently, however, European pig prices have been falling while UK prices have continued to increase, but at a more modest rate. Consequently, the market dynamic may change and producer price increases will be harder to achieve.”

As well as price increases helping producer confidence, a further positive factor is the steadying in the cost of the producer’s largest cost - feed.

“Twelve months ago feed prices rose significantly on the back of tight global supplies and producer margins fell sharply,” commented Mr Ashworth.

“More recently, as the northern hemisphere harvest got under way, protein and grain prices have eased and are currently trading around 10 -15% lower than twelve months ago.

“Furthermore, many producers have invested heavily in recent years to improve the health and productivity of their sows which has paid dividends in steadily increasing litter size and reduced mortality.”

Evidence from sow slaughterings and the latest June census suggests that improved returns over the past year are beginning to result in increased confidence among producers.

“Over the past quarter, sow slaughterings have been 12% lower than the same period last year, said Mr Ashworth.

“In contrast, over the first six months of 2013 sow slaughterings had been some 2% higher.

“The provisional June census results also show a small increase in the number of gilts intended for breeding on farms.

“Together these two indicators point towards an increase in the size of the UK sow herd in the short term. However, this may do no more than return the breeding herd to the size it was twelve months ago.”

Available census data from across Europe suggests that, among those countries that have reported a June census, the European sow herd is broadly stable but 15% smaller than it was five years ago.

“With the UK and European sow herd remaining significantly smaller than it was five years ago, even a modest increase in herd size and productivity will still leave European production tight by historic levels,” added Mr Ashworth.

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