ANALYSIS – The pig industry is unfortunately not immune from the problems in the economy generally, reports senior editor, Jackie Linden. That was the message from conferences held in the UK and the US recently.A new report expects growth in global meat protein consumption to continue to lag behind income and population growth in important emerging markets.In the EU, there has been last–minute clarification over slat dimensions and space allowances that will take pressure off some pig producers in the region ahead of the 2013 Directive.
The general state of the UK economy, how consumers are reacting to it and the resulting prospects for the UK red meat and dairy industries were discussed in the main session of the Outlook Conference held in London recently.
“2011 was the year it all went wrong for the UK economy,” said Head of Agriculture at HSBC, Allan Wilkinson in his presentation on the current economic climate and how it impacts agriculture. However, recent surveys point to a stabilisation in the economy as one indicator points to a greater willingness for businesses in the UK to invest, he said.
He presented data showing the consolidation of the buying power in the agricultural supply chain in the UK, which shows that consumers and farmers are squeezed by the supermarket buyers and suppliers to the industry (feed, equipment and agrochemicals), who hold the real market power.
The ‘Big Picture’ in terms of the red meat and dairy outlook was presented by Giles Quick, Director of Kantar Worldpanel in his presentation on consumer trends in the UK and the drivers of spending.
He stressed that red meat and dairy products are a cornerstone of UK food retailing, worth £15 billion a year. The grocery trade is using many more promotional deals on these items and there has been growth in both the budget and high-end parts of the market. Health is here to stay as an important driver of food purchases, and the concept of ‘British is best’ is important in consumers minds in the current uncertain times.
Finally, Mr Quick stressed that if retailers were to take more account of whole store value, rather than category value, it would help sales of red meat particularly, which would benefit producers and processors in that sector.
Longer term prospects for agriculture generally and on prices for red meat and dairy products in the light of the economic and consumers trends were addressed by Ken Boyns, Director of Market Intelligence at the Agriculture and Horticulture Development Board.
He said that demand for meat and dairy products will remain strong, while supply will be constrained and/or challenged. The rate of technological improvement, its level of adoption and hence, supply potential will drive world prices.
“The UK must focus on technology and global markets to remain competitive,” he told the Outlook Conference audience.
Turning to the US, the economic recovery is continuing but the rate is slowing. According to economist, Eric Trachtenberg, from McLarty Associates, speaking at the American Meat Institute Expo and conference in Dallas, consumption and residential investment have increased but falling non-residential investment could make the recovery stall.
Rabobank expects stable, slightly pressured pig prices globally in the second quarter of this year, with a modest recovery in the second half of 2012. Global pig prices have softened in recent weeks to the extent that the Chinese government announced in late April that it has initiated procurement for its frozen pork reserves, according to the report, Rabobank Pork Quarterly Q2 2011. However, pig prices are still high by historical standards in order to offset high feed costs.
In the longer term, Rabobank expects growth in global meat protein consumption to continue to lag behind income and population growth in important emerging markets, raising volume risks to processors and price risks to buyers, from processors to consumers.
Clarification has been provided – at last – on some of the vital details relating to flooring and space allowances acceptable under the forthcoming EU directive. With much of the focus on the partial ban on sow stalls, other aspects of pig housing also included in the new rules have been overlooked until now.
Finishers with concrete slats with a slot width of more than 18mm – but not more than 21mm – will not need to replace them after all. It has also been confirmed by the European Commission that producers may include the space occupied by free–access feeders when calculating 1.64 square metres of unobstructed floor area for gilts and 2.25 square metres for sows.
This news will be welcomed by many pig–keepers all over Europe. In the UK, Defra, NPA and BPEX say they have been working to prevent the rules, which come into force in January along with the partial stalls ban, from bringing the European pig industry to its knees.
Based on data collected from UK National Pig Association members and scaling that up across the EU, the organisations estimate the total cost of replacing concrete slats for the sake of two or three millimetres would have been more than £50 million (around €62 million).