Seasonal pressure and operational challenges continue to impact pig market

According to the latest market commentary from Quality Meat Scotland (QMS), operational challenges among the abattoir and processing sectors are adding to the seasonal pressure in the pig market, whereas tightly supplied markets have seen farm gate prices remain firm for both prime cattle and sheep despite labour shortages in processing.

QMS Chief Economist, Stuart Ashworth, says that the prime pig price, which is currently 6% lower than a year ago, is due to several influences.

“Prime cattle are trading some 8-9% above year earlier levels, and whole prime lamb prices are particularly firm; around 25% higher than a year ago.  Meanwhile the well documented current challenges in the pig sector, leading to delays in slaughter and resulting in carcase weights 5% higher than a year ago, fat levels 2.5% higher and backlogs of stock on farm, is aggravating the seasonal slide in prices such that prices have fallen 10% since the end of July compared to a 6% slide over the same period last year.”

While farmgate prices for cattle and sheep remain firm, Mr Ashworth notes that the ability of abattoirs and processors to pass these increases through to the consumer remains challenging. 

“According to the Office of National Statistics (ONS), overall retail beef prices are little changed on a year ago but up 2% since the start of the year.  Retail prices for lamb have climbed a little quicker, up around 4% on the year, while pork moved upwards by 1.4%,” says Mr Ashworth.

Through 2020, the COVID-19 control measures pushed red meat purchases into butcher’s shops and supermarkets and as 2021 has progressed, and out of home eating became more accessible, the way in which meat is bought and consumed has changed. 

Mr Ashworth explains: “Latest analysis by market research company Kantar worldpanel suggest that over the past quarter primary beef sales in retail shops have fallen 6% with mince sales falling 8% and steak sales falling 13% as dining out has picked up.”

Similarly, lamb sales through supermarkets and retail butchers are reported to be down 8% in the past quarter with sales of roasting cuts baring the biggest part of the fall although when measured over the whole year lamb volumes have grown compared to the same twelve months a year ago.  The volume of sales of pork and processed pork products are reported to have recorded more modest declines of around 3% over the past quarter.

“Of course, high street butchers and multiple retailers are not the whole market and wholesale deliveries into catering businesses have picked up and so the total volume of meat consumed will not have changed as much as primary retail sales may suggest.” 

Furthermore, retail sales for most meat categories continue to show increases from 2019.

“The balance of cuts demanded though will have changed and indications are that wholesale prices reflect this with cuts more popular in restaurants 10-20% higher than a year ago while more commodity products and mince show more modest wholesale price movements of less than 5%.  Retail prices for those cuts more favoured in out of home eating like roasts and steaks, have shown price increases while those less used in catering have moved little and, in some cases, fallen.  The ONS figures, for example, report beef mince prices 2% lower on the year while roasting joints and rump steaks are 9% higher.”

Retail and catering demand can quickly impact on farmgate prices but farmgate prices can also be affected by the basic capacity of abattoirs to process livestock.  Many abattoirs and, in particular, butchery processing lines are currently constrained by staff shortages limiting the number of carcases they can handle in a day. 

This can result in a situation that irrespective of wholesale demand abattoirs may be oversupplied with animals for the capacity at which they can currently operate and prices adjust accordingly.  This is particularly the situation currently facing British pig processors and a contributory factor in the current slide in farmgate pig prices.

“These differences in scale between movements in farmgate, wholesale and retail prices remind us of two things. Firstly, that the balance of cuts demanded from our processors can change quickly and play a big part in the value of the whole carcase. Secondly, how challenging it is for abattoirs and processors to push through their cost increases to their buyers and ultimately consumers,” concluded Mr Ashworth.