In his summary to the Outlook 2013 Conference in London last week, Stephen Howarth (pictured above) of the Agriculture and Horticulture Development Board (AHDB) highlighted how 2012 had been a difficult year for UK pig producers, with high prig prices but even higher costs. The high level of sow culling pointed to a decline in the breeding herd, while prices in the EU became more volatile as supplies tightened.

Tighter supplies will also be a feature of the market this year, he suggested. In the UK, production is forecast to fall two per cent. With EU production also down, imports are set to drop while export demand should remain robust. The sow stall ban and its repercussions on the market are creating a high level of uncertainty.

Market Background

On the market background on the last few months, Mr Howarth said that there were positive developments in pig prices last year, peaking at 161p per kilo just before Christmas 2012 although feed prices also remained high. Prices usually fall after Christmas and they have done so but throughout 2013, prices are expected to remain above those of 2012.

On the supply side, volumes have been higher in the first few weeks of 2013 than the previous year, whilst average weights have bene tracking close to the seasonal norms since October.

The final figures on trade are due out this week for December to complete the year's statistics but the volumes to November show an increase in processed products. Exports picked up at the end of 2012 as the export agreement with China begins to bear fruit.

Total retail purchases of pig meat in 2012 were close to those of the year before in terms of both volume and pattern but 2013 started at an unusually low point, with fresh pork sales particularly affected in the last quarter. Bacon fared better, while sliced and cooked meats (mainly ham) did well, holding up strongly during the summer. The pattern for sausages was variable but down overall, which Mr Howarth attributed to the poor summer weather, offering few opportunities for barbecues.

Looking to the EU, he said that pig prices there have stabilised after falling since October. A recent rise in sterling terms, he attributed to due to exchange rate changes. The UK pound has weakened against against the Euro since the summer, wiping out gains made earlier in 2012.

For cull sows, prices have been falling since November owing to a weak export market - a trend which is all the more surprising owing to the exchange rate favouring rising prices.

Also unusual, is that British sow prices have in the past tracked those in Germany but they have, in fact, fallen behind since summer 2012.

Weekly sow slaughterings in the UK were usually high between July and October last year, which might account for the lower prices. However, they have fallen back since to near-normal levels.

Weaner prices have strengthened since falling to a four-year low of less than £40 per head in September last year.

Costs of production of finishing pigs per kilo have remained high since last summer mainly as the result of high feed prices. A significant fall is unlikely before this year's harvest, according to Mr Howarth.

The current average production cost is more than 160p per kilo. Although the deadweight average pig price (DAPP) is at near-record levels, it is still behind the average cost of production. Pig producers have bene losing money since later 2012, with current losses of more than £5 per pig, which amounts to around £1 million per week to the UK industry.

Future Supplies

The UK's herd of breeding females has remained broadly stable over recent years. As a result of this and the peak in sow slaughterings last year, the breeding herd overall is getting younger. The decline in herd size to 405,000 in December 2012 was anticipated but a slow recovery is expected in the next two years up to an estimated 410,000 in December 2013 and 425,000 by the end of 2014.

The output of sow feed in the UK was down by five per cent in the fourth quarter of 2012, following the pattern in the sow herd.

In 2012, UK clean pig slaughterings exceeded 10 million for the first time since 2002.

Higher slaughter numbers from fewer sows reflects the improved productivity of the breeding herd, which is expected to continue in coming years although the rate is forecast to slow down.

In 2013, however, the shrinking of the breeding herd is likely to outweigh the productivity gains, such that all four quarters of 2013 will register few pigs slaughtered than the same period of the previous year.

Mr Howarth expects sow slaughter to return to more normal levels later this year.

On average carcass weights, he forecasts weights to track the usual seasonal norms in 2013 with a peak this month, decline to a low-point in July and then a further rise to a flat peak in autumn.

Turning his attention to the EU, Mr Howarth highlighted that the pig herd was in decline in the year to June 2012, even before the sow stall ban came into effect in January 2013. Only Romania (for breeding sows) and Germany (for total pigs) showed any significant increases in pig numbers between June 2011 and June 2012. All the other 25 states showed the declines, the most dramatic being Italy (sows only), Poland and Sweden. Unsurprisingly, slaughterings are already falling back across the EU and are expected to fall back further.

On pig meat trade, UK pig meat imports were broadly stable last year but may fall this year as EU supplies tighten. The growth in processed meat imports in 2012 is likely to stall and will not longer offset declining pork and bacon volumes.

Overall, UK pig meat exports are forecast to change little over 2013 although they are set to decline more as the year progresses.

For more details on the pig meat market from AHDB/BPEX, click here.

Go to our previous news item from the Outlook 2013 conference by clicking here.