Scottish pig producers are feeling the pinch with prime pigmeat prices nearly 17% lower than this time last year, according to the latest market information from Quality Meat Scotland.
However, Scotland’s prime pigmeat prices are maintaining their premium over European prices, says Stuart Ashworth, QMS Head of Economics Services.
“History would tell Scottish prime pig producers to expect farmgate prices to rise seasonally to a high point at this time of year. However this year producers have seen little movement in prices over the first half of the year, in fact current prices are very similar to those in late February,” he added.
There are a number of factors that are driving this situation.
“Some of the price pressure that we are seeing at the moment will be due to an increase in UK production. Over the first half of the year prime pig slaughterings have increased by almost 4% and prime pork production has increase by 5%.
“Meanwhile Kantar retail market analysis suggests that demand for primary pork products is under pressure despite falls in retail prices. However, because the UK is only around 60% self-sufficient in pigmeat products, there is an opportunity for domestic production to maintain volumes, at the expense of imported product,” said Mr Ashworth
But it is not just Scottish pig producers who are experiencing lower prices. This year on year decline in farm gate prices is also apparent across Europe.
“Danish pig farmers are receiving prices 11% lower than last year, Germany and Poland are seeing prices 15% lower and Spain and the Netherlands 18% lower. It is little consolation for Scottish producers that when converted to Euros their price is only 6% lower,” Said Mr Ashworth
“In terms of European market this leaves UK producer prices almost 25% higher than the European average when quoted in Euro.”
The low prices across Europe have once again resulted in the European pig sector calling on the European Commission to re-introduce Private Storage Aid (PSA) to support prices. PSA was used in the spring to support the market, but some of the pigmeat stored at the time is potentially entering the market and may be affecting current prices.
The European Commission however points out that an increase in European production of 5% in the first half of the year is the main cause of falling prices and they are reluctant to respond favourably to requests for aid for what they see as a supply driven situation.
Mr Ashworth commented: “The loss of the Russian market has been more than offset by the growth in EU pigmeat exports to other parts of the world particularly China, South Korea and Australia.
“Nevertheless, this growth in exports has done little to support producer prices. Lowering producer prices has made the product competitive on export markets, leading to a supply push rather than a demand pull.
“Although uncomfortable for producers, the European Commission would argue that the market is working correctly at the moment,” he concluded.
With UK and European production expected to continue at higher levels than last year for the remainder of 2015, it is likely that pig producers are going to have to wait a while for prices to firm.