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Range of Factors Behind Rising Farmgate Pig Prices

08 August 2016

UK - The UK pig price has enjoyed some strength over recent weeks, climbing to 131 p/kg dwt, an increase of 17 per cent since March, but is still 20 per cent short of 2014, according to the latest market information from Quality Meat Scotland.

In Europe, the average price has climbed 30 per cent since March to sit some 10 per cent higher than a year ago and is closing in on the prices seen in 2014.

“These relative price movements have resulted in the unusual situation of UK producer prices, when quoted in Euro, being lower than the European average - a situation which diminishes the attractiveness of European pork on the UK market and helps to support UK prices,” said Stuart Ashworth, QMS Head of Economics Services.

Looking at the factors which have been driving the price higher recently, he said pigmeat production across Europe is still running ahead of last year, although the gap is narrowing and is expected to dip below last year’s levels in the final third of the year.

In the UK, prime pig slaughter numbers dipped below last year’s levels in May and June but higher carcase weights mean production is little changed from last year.

“Producer price improvement is not then being driven by a reduction in supply,” said Mr Ashworth. “Farmgate prices have risen in response to the dramatic changes in international demand for pork.

“China has returned to the market place following a significant reduction in their pig herd and both the UK and Europe have gained from this, but so too has the USA.”

According to Mr Ashworth, over the first five months of the year UK pigmeat exports to China have increased by 70 per cent and the growth has been even more dramatic across the European Union, where sales of pigmeat, mainly frozen product, to China between January and the end of May increased from 130,000 tonnes in 2015 to almost 400,000 tonnes in 2016.

Sales of offals to China have also grown by 50 per cent and Hong Kong, Japan, the Philippines and Australia have also increased their supply of European pig meat.

“This strong demand pull is unlikely to diminish in the short-term, although it may stabilise as Japan’s herd recovers from the impacts of the PEDv virus and the Chinese sow herd begins to rebuild,” said Mr Ashworth.

“In 2015, the Chinese sow herd was estimated to be 15 per cent smaller than it had been four years ago so, while there is scope for the sow herd to grow, it will take some time before that will materially impact on Chinese import requirement.”

Looking ahead, historically UK and EU pig prices begin to slide in the Autumn, observed Mr Ashworth.

“This year, with an expectation of declining production in Europe on the back of a December sow herd 1.8 per cent smaller in 2015 than 2014, plus continued strong demand from Asia, history may not repeat itself,” said Mr Ashworth.

ThePigSite News Desk



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