3rd May 2019

Prime Pork Market Trends Influenced by Complex Factors

Recent movements in the prime pork market highlight the complexity of the red meat industry and how international trade, animal health and consumer demand all interrelate with each other.

All these factors have impacted on the European pig industry over the past few years.  Initially, outbreaks of African Swine Fever (ASF) in Eastern Europe led to a banning of pigmeat imports by Russia in 2014, and heavy culling of the herd in affected areas. Although considered to be illegal by the World Trade Organisation, this restriction still applies.

“While alternative non-EU markets were found for most of the product that previously went to Russia, there was some over-supply in Europe,” said Stuart Ashworth, Director of Economics Services with Quality Meat Scotland (QMS).

“As a result, the average producer price across the EU declined and by 2015 was recorded to be 20% lower than it was in 2013.  Prices subsequently rebounded over the next two years, but the EU price in 2017 was still 9% lower than it was in 2013.”

Much of the product redirected from Russia went to Asia and China which in 2016 was home to nearly 45% of EU pigmeat exports, said Mr Ashworth. However, as China increased its domestic production its requirements for imports reduced and by 2018 it was importing 26% less pigmeat from the EU than in 2016 – although this still accounted for more than one-third of all EU pigmeat exports – and EU pig producer prices once more dipped during 2018 on reduced export opportunities. 

However, the outbreak of ASF in China during 2018 has now changed the complexion of the global market again., he observed.

“China reports that measures introduced to manage ASF have led to its pig herd being reduced in size by nearly 17% over the past 12 months resulting in a significant fall in domestic production and an increase in imports,” said Mr Ashworth.

This is already beginning to have an impact on international market prices, and over January and February EU pigmeat exports to China have increased by 13%. 

EU prices have climbed steeply since late March - up 23% since the beginning of March and 25% since the beginning of the year to currently stand 18% higher than a year ago.

“Scottish producers, however, have not seen such a firming of prices yet instead seeing only a modest increase of 1.8% since the beginning of March and still trail year-earlier levels by four per cent,” said Mr Ashworth.

Impacting on this is the fact that although the UK exports substantial quantities of pigmeat, and has benefited from the Chinese situation, it is itself a major importer of European pigmeat and until very recently UK domestic producer price was one of the highest in Europe. 

“The recent rise in prices in major exporting countries like Germany, Spain, Denmark and the Netherlands has moved their price from well below the UK price to very similar, if not higher, and the UK price is beginning to respond.” 

A further challenge in the home market though is consumer demand for pork products.  The latest research on domestic demand from Kantar Worldpanel suggests there has been modest growth in the quantity of pork products purchased.

“However, this has been achieved by significant growth in lower value cuts like shoulder roasts and bellies at the expense of higher value cuts like leg roasts and loins and overall the revenue generated from this increased volume is actually lower than 12 months ago.  This situation is limiting the ability of processors to pay more to primary producers,” said Mr Ashworth.

What the current global pigmeat market shows, he said, is the significant destabilising impact a disease outbreak can have locally and globally. Taking all the measures possible to prevent diseases like ASF entering Scotland is vital for the sustainability of the livestock sector. 

This not only means high levels of biosecurity at individual farm level but equally, with holiday season approaching, it is important that holiday-makers dispose of food waste in a safe and proper way.

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