The UK market situation

Prices strengthened in November following the relaxation of the ban on exports, and a considerable UK price premium over the average EU price re-emerged (reaching a peak of 18p/kg). However UK prices began to move down again in December, and by early February had fallen below 90p/kg.

Consequently the UK pig industry temporarily moved back into a loss-making situation.

The weaker tone to the market at a time of historically low production was the result of a combination of factors:

• A weakening EU market, arising from some growth in supplies together with a switch back to beef.
• An increase in the volume of low-priced imports (official trade statistics not yet available). The UK price premium had therefore fallen to about 4p/kg.
• Seasonally weak demand for fresh pork and bacon in the period after Christmas, with consumers paying off credit card debts.
• The clean pig meat export trade slow to get re-established.

However, the UK market began to show some recovery in mid-February. A strengthening EU market and the continuing decline in weekly UK throughput were the major factors. By the weak ended 23 March the average UK price stood at 96p/kg dw, 8p more than five weeks earlier. The UK price premium over the average EU price was little changed during March, remaining at about 4p/kg.

EU Producer Prices

In the EU the downward trend in pig prices seen since Christmas began to reverse in the middle of February, due to lower than expected supplies and a strong export trade to non-EU markets. In the month to mid-March EU pig meat prices rose by 10 per cent on average. Particularly marked increases were recorded in the Netherlands (+16%), Germany (+13%) and Spain (also 13%), although Danish prices only gained one per cent during this period.

The rise in Dutch prices can partly be explained by relatively short supplies. Year-to-date clean pig slaughterings in the Netherlands are down about 11 per cent compared with 2001. In Spain the market is being disrupted by movement restrictions imposed in the Barcelona region as a consequence of classical swine fever. Some one million pigs are reported to be held up.

Slaughterings

Weekly clean pig slaughtering levels in the UK showed signs of increasing slightly from August through to early December. However slaughterings fell back slightly from January, and in March were averaging less than 200,000 a week. A primary cause of the low throughput is, of course, the contraction in the breeding herd. But an increasingly important secondary reason has been a decline in productivity over the past year or two, as indicated by the following graph.


Most of this decline in productivity is the result of PMWS, but the drop seen in the latest few months can be attributed to the changed age profile of sows recorded in the June 2001 census. The increased number of older sows will have had a negative impact on average industry productivity.

The consequence of the build up of older sows on farms is now being seen in high sow culling rates. From February through to October 2001, sow cullings were at very low levels as the export ban removed the main market for sow meat. Immediately the ban was lifted weekly sow slaughterings began to rise, and this backlog of older sows is still being cleared as their piglets are weaned.

Current sow slaughter levels are also likely, to some extent, to be due to producers moving out of pig farming.

	Production indicators (000 head)
	Period	2000	2001	2002*
Weekly ave clean slaughter	March	249	195	187
Weekly ave sow slaughter	March	7.1	0.9	6.6
*Estimates

Breeding Herd Numbers

Average weekly sow slaughter in March 2002 is estimated at about 7,000 head. This was the same as in February 2000, when the breeding herd was approximately 25 per cent larger. Because gilt replacement levels are also low, this implies that the national breeding herd is currently continuing to contract. The December 2001 pig survey results show that sow numbers, at 547,000 head, were five per cent lower than in December 2000 and nine per cent down on June 2001. The June 2002 pig results will almost certainly record a further fall in sow numbers

Consumption

Consumption of pork clearly continues to be affected by supply shortages and higher retail prices. In the 12 weeks to 3 March, retail pork purchases were five per cent less than a year earlier although expenditure was just one per cent lower. Retail bacon purchases have been less affected by lower domestic production as there has been a further growth in imported supplies. In the latest 12-week period, purchases were unchanged while expenditure was up three per cent.