SCOTLAND, UK - After a prolonged period of declining farmgate pig prices, recent weeks have seen an upturn.
According to Iain Macdonald, Senior Economics Analyst with Quality Meat Scotland (QMS), the opening week of May was the fifth consecutive week, and seventh week in nine, to see an increase in the GB Standard Pig Price (SPP).
“These increases mean that the SPP has risen by more than 2.6p/kg from its low point in the week ending March 19 to reach 114.7p/kg dwt in the week ending May 7. Nevertheless, this was still nearly 17p (13 per cent) below its level in the same week of 2015,” said Mr Macdonald.
Looking at the factors which have been driving the price higher recently, he said historical slaughter statistics for the UK show that weekly deliveries of prime pigs to abattoirs tend to be at their annual lowest in April and May.
Supporting evidence from the SPP price report shows that the number of pigs handled by GB reporting abattoirs has fallen back since Easter, down 4 per cent in the three weeks to May 7 when compared with the three weeks to March 19.
“In addition to lower numbers, those pigs being supplied to abattoirs tend to have a lighter carcase weight in April and May than earlier in the year. UK slaughter data shows that the average carcase weight in May tends to be around 1 per cent lower than two months previously,” said Mr Macdonald.
“In the SPP sample, the average carcase weighed 82.8kg during the first week of May, down from 83.7kg in the week ending March 19. As a consequence of lighter carcase weights, the volume of pigmeat produced will have tightened more significantly than slaughter numbers, placing additional upwards pressure on the market.”
The result of lower carcase weights has meant that while per kilo farmgate prices have risen by 2.3 per cent between mid-March and early May, the price of the average carcase rose more slowly, up 1.2 per cent to £94.94.
“The flip side of this is that higher carcase weights than last year mean that the average carcase price is down by 12 per cent year-on-year compared with the 13 per cent decline in per kilo prices,” observed Mr Macdonald.
“However, in the same period last year, there was a similar tightening of weekly pigmeat supplies yet the SPP was still edging lower. The difference this year is that reports from the demand side have been better.”
During the 12 weeks to April 26 2015, GB households bought nearly 8 per cent less pork than a year earlier. In the corresponding period this year, said Mr Macdonald, sales volumes began to recover, rising by 0.7 per cent.
“Moving into May, industry sources point to the recent spell of warm, dry weather across much of the UK as a stimulus for demand with people beginning to hold their first barbeques of 2016.
“A reflection of a shift in the balance between supply and demand has been seen in the spot market with reports suggesting that prices have started to exceed contract levels. This is a clear sign that a seasonal tightening in pigmeat production has resulted in supply beginning to lag behind demand,” he said.
It also seems likely that a stabilisation of prices across the EU at a level much closer to those in the UK, plus a weaker sterling against the euro than 12 months, ago have limited the downwards pressure on the market.
This combination has made the market less attractive to imports, while supporting the price competitiveness of UK pigmeat on the continent and in the Far East.
“Indeed, the difference between average farmgate prices in the UK and EU has narrowed from over a quarter in May 2015 to 10-12 per cent in recent weeks. A better trading environment is highlighted by the latest HMRC trade data which pointed to a 5.5 per cent annual reduction in the volume of pigmeat imported to the UK during the first quarter of 2016 while exports grew by 18 per cent,” added Mr Macdonald.
However, he observed, farmgate prices have remained well behind 2015 levels and the squeeze on producer margins continues. Some significant increases in the price of soyameal in recent weeks, following heavy flooding in the key soyabean growing regions of Argentina, will have also been unhelpful to pig producers watching their bottom line.
This has pushed spot prices above 2015 levels, having been 20 per cent lower as recently as early April. Meanwhile, feed wheat and barley prices have stabilised at slightly below 2015 levels.
ThePigSite News Desk