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UK Outlook for Pig Meat Supplies


01 May 2013

UK Outlook for Pig Meat Supplies - April 2013UK Outlook for Pig Meat Supplies - April 2013

As expected, the December Surveys of Agriculture confirmed a significant decline in the UK female breeding herd since the summer.
Outlook for UK Pig Meat Supplies
AHDB

In December, the breeding herd totalled 400,000 head, 25,000 down on the June figure, although a smaller decline compared with a year earlier. The decline was largely in sows, with in-pig gilt numbers similar to both June 2012 and December 2011. However, it should be noted that official figures usually indicate a slightly higher breeding herd in June than in December but in reality this is less likely. The surveys also revealed that the total pig herd numbered 4.22 million head, its lowest level in more than 60 years.

Perhaps more surprisingly, the December Surveys showed a sharp increase in maiden gilt numbers. They were a quarter higher than a year earlier and around 13 per cent up on June. This increase marks an acceleration of the recent trend, driven by a greater focus on productivity which has encouraged higher sow replacements, a situation helped by the firm cull sow market during most of 2012. The acceleration may indicate that optimism is starting to return with some producers restocking following depopulation in the autumn and others planning some expansion.

UK Maiden Gilt Numbers

Source: Defra, Scottish Government, DARDNI, Welsh Government

The increase in maiden gilts may indicate that a modest expansion of the herd might be expected over the coming months. However, with feed prices still high and the estimated cost of pig production still above the pig price, any expansion is likely to be small scale. As a result, the June survey results are forecast to show a year-on-year decline in the breeding herd. However, they may be slightly higher than the December figures.

Longer-term prospects will depend on developments in both the pig and feed markets. Currently, there are promising signs that the financial situation of the industry will be better going forward. If that is the case, then further modest growth might be expected. However, the appetite for expansion is likely to be limited in the medium term, given the increased volatility in the markets in recent years and difficulties obtaining finance and planning permission.

UK Pig Breeding Herd Trends

With a broadly stable breeding herd, increases in clean pig slaughterings in recent years are down to improved sow productivity. This trend has continued, with the number of pigs slaughtered per sow in 2012 averaging 22.3, compared with 21.7 in 2011. Further productivity improvements are likely in the coming year, not least because the producers who left the industry last year will have included many of the least efficient. Thereafter, further improvements might be expected but the rate of growth may slow down, especially if there is a further shift to outdoor production.

Trends In Productivity in the UK Sow Herd

Source: AHDB Market Intelligence

Despite the productivity improvements, the fall in the breeding herd means that the upward trend in clean pig slaughterings seen since 2009 is forecast to reverse in 2013. However, the drop is now expected to be smaller than in our previous outlook, largely due to further productivity gains. Looking further ahead, the recovery in the breeding herd and further productivity gains should lead to the resumption of the upward trend in slaughterings in 2014.

High feed prices in the second half of 2012 led to increased levels of culling of adult breeding pigs but they have now returned to more normal levels. This year, cullings are likely to be closer to seasonal norms. However, with replacement rates high, they may be higher than they were before 2012.

Actual and Forecast UK Pig Slaughterings

Source: Defra, AHDB. Figures in bold are forecasts

Having dipped during last autumn, carcase weights have returned to more normal levels. If anything, they have started 2013 above year earlier levels and there has been little sign of the seasonal fall normally seen from spring onwards. Looking ahead, there are reports that processors may look for heavier pigs to offset lower slaughterings. As a result carcase weights are likely to stay higher for the rest of the year.

UK Pig Meat Production and Forecasts

These higher carcase weights are expected to partly offset the fall in slaughterings, leading to only a marginal fall in pig meat production for the year as a whole. Nevertheless, supplies will be tighter through most of the rest of 2013 and early 2014. Thereafter, the recovery in slaughterings is forecast to lead to higher production.

At the same time as UK supplies are tightening, the downward trend in EU production recorded over the last year is expected to continue. Latest forecasts suggest a particularly sharp fall in EU production in the second half of 2013, perhaps as much as 4% year on year. There is still some uncertainty about these forecasts due to the impact of the new welfare regulations which came into force at the start of the year. As well as further reducing the breeding herd, the move to group housing could limit any productivity gains, at least in the short-term.

With tighter supplies across the EU, any shortfall in pig meat production in the UK is unlikely to be filled by pulling in higher imports. In fact, the supply situation is likely to mean that UK pig meat imports are lower in 2013 than in 2012, perhaps by as much as six per cent. This is consistent with the drop already recorded in the first two months of the year.

Actual and Forecast Supplies of Pig Meat in The UK

Source: Defra, AHDB. Figures in bold are forecasts

The tight supply situation in the EU will create opportunities for UK exporters. If the pound remains relatively weak, this will help to ensure the competitiveness of UK pig meat on export markets. In addition, in 2013, the UK will have a full year of exporting to China and will begin shipping to Australia for the first time. All these factors point to strong export prospects and, despite lower production, a small increase in shipments is forecast.

The balance of production, imports and exports suggest that there will be a significant fall in supplies available for consumption in the UK during 2013. This would indicate that a decline in retail sales is likely, already reflected in figures for the year to date. This, in turn, suggests further increases in retail prices, although this will depend on consumer confidence, which currently remains low.

May 2013

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