An improved trade balance between pork imports and exports looks set to reduce UK supplies, possibly resulting in a firmer domestic pig market than in the last two years, according to AHDB Pork.
While this forecast is accompanied by several “yes, but and maybe” qualifications, the conclusion is that the UK pig market looks like being more stable than in recent years with “even the possibility that prices could rise at times”.
Although accepting that domestic production is set to continue rising this year and that consumer demand is still subdued, AHDB Pork’s latest UK supplies forecast finds a glimmer of hope in an improving balance of trade position.
“Last year, the strong pound and weak EU market meant that UK pig prices remained well above those on the continent,” it said. “This meant a small rise in imports and constrained exports.
“This year, prospects for international trade look better. In large part, this is because of the weakening of the pound against both the euro and the US dollar. The gap between UK and EU prices has narrowed significantly and now stands at around 10p/kg, more in line with historic norms. This reduces the price incentive for buyers to source imported pork, potentially raising demand for domestic pigs.
“Furthermore, reductions in the EU pig herd mean that production is expected to fall in the second half of the year. This could reduce the availability of supplies for export to the UK. Overall, therefore, imports are expected to be lower than last year, in line with the trend seen in January and February.”
On the export front, meanwhile, 2016 has started strongly, thanks to an improved pound/euro exchange rate and the strength of demand from the Chinese market.
“Demand for EU pork in China is very strong and UK exporters are benefitting from this,” said AHDB Pork. “Reports also suggest that any recovery in Chinese production will be slow, so import demand will remain strong for the rest of this year and probably beyond. This should mean that exports perform much better in 2016 than in 2015.”
All of which adds up to a bit of cautious optimism from AHDB Pork.