11th February 2013

QMS Market Commentary: European pig prices ease

Producer prices for prime pigs across Europe and the UK have shown their usual seasonal decline over the past few weeks, reports Stuart Ashworth, Head of Economics Services with Quality Meat Scotland.

Scottish producers have seen prices slide by 4p/kg deadweight (dwt) (2.5%) since Christmas although prices are 12% higher than last year.

“A similar seasonal slide has occurred across most of Europe with the average producer price falling 1% since Christmas but with greater declines reported by major producers like Denmark, the Netherlands, Germany, Poland, France and Romania,” said Mr Ashworth.  However, southern European producers including Spain and Italy have recorded price increases since Christmas.

“Despite the recent slide, most European producers are benefiting from prices 12% or more above last year’s levels.

“Indeed, Romania and Spain report prices more than 20% higher than 12 months ago.  Producers in Germany, France and the Netherlands, however, will be less content with prices that are only around 9% better than twelve months ago.”

Nevertheless, while prime pig prices remain above year earlier levels this is not the case for cull sows, with UK prices 13% lower than last year.

“One of the drivers for this is that a lot of UK sow meat is exported to Germany where sow slaughterings increased in late 2012 reducing the need for imported pigmeat  The German market has also been affected by the recent decision of Russia to ban chilled meat imports from Germany in the short term because of food safety concerns,” observed Mr Ashworth.

It is too early yet, he said, to guage whether the recent changes in EU market prices reflect adjustment to the more rigorous implementation of the European sow stall and tether regulations.

However, the year-on-year price increase across Europe does reflect a generally reduced supply of pigs for slaughter.

“This decline in pig supplies similarly reflects a slow adjustment in the size of the European sow herd.

“Mid year estimates of the sow population in 2012 showed most major pig producing nations reducing sow numbers by 3% or more and more recent estimates from Germany and Denmark suggest that the restructuring is continuing.

“Estimates of the German sow herd made in November last year suggest a decline of more than 3% while latest figures from Denmark show a small decline in the sow herd in January and increased sow slaughterings in the final quarter of 2012.”

The basic short term supply scenario for pigmeat, he said, remains one of reducing supplies as producers adjust to the new welfare regulations.  However, in the longer term some reinvestment as the fewer, but larger more efficient producers, across Europe react to the better prices seems likely.

“It is for this reason that the recent European Commission publication on market prospects sees European Union pig meat production reach a low point in 2013 before slowly recovering.

“That recovery is, however, expected to be a slow process with production still being below 2012 levels in 2020,” said Mr Ashworth.

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