According to the latest market commentary by Quality Meat Scotland (QMS), along with the legacy of extremely challenging market conditions faced across the UK last winter, pig producers in Scotland have been faced with additional uncertainty, with Brechin now operating at around 50% capacity, following the processing site’s temporary closure in January.
Iain Macdonald, QMS senior economics analyst [picture], said that the coming months will prove critical for the long-term confidence of pig production in Scotland.
Mr McDonald said that, after a challenging winter of depressed pig prices and rising production costs, the pig market has so far recovered strongly between spring and summer 2021, as the GB price for a standard pig carcase (SSP) climbed from a low of 138.5p/kg in February by 15.5% to reach 159.9p/kg in the week to July 10th.
However, he warned, there have been signs of the market beginning to soften as we approach the traditional summer high, with the rate of increase slowing, and in order to assess the prospects for the autumn, Mr Macdonald says that we first have to look back.
“Since the SPP was introduced in 2014, farmgate prices have fallen between July and December in five of the seven years,” he said.
“In 2020, the decline was the strongest of the period. The exceptions were 2016 and 2019, when surges in pork imports to China had boosted the global market.
“Prospects for the second half of 2021 are once again likely to depend on global market forces, with the 2020 fall coming despite firm domestic retail demand.”
Producers in the EU saw even sharper price declines last winter, with GB prices averaging around 25% above EU levels between October and February.
“While reduced demand from the catering sector limited import volumes, falling EU farmgate prices did pass through to the cost of importing pig meat to the UK, and the option of a cheaper alternative will have pressured prices across UK supply chains,” he continued.
EU prices subsequently made a sharp recovery in spring 2021, narrowing the price gap between GB and the EU to around 5% between mid-March and mid-April. however, the EU market has faced renewed downwards pressure since mid-June. With the EU average slipping to 134p/kg, the GB premium has surged towards 20%.
He also noted that China has been a major driver in an increase of non-EU exports, but that as the country’s pig production has rebounded following a mass African Swine Fever outbreak, this has caused sales to China to contract.
Mr McDonald added that feed costs should also be considered: “Even if prices were to follow their five-year average trend in the second half of the year, and non-feed costs were to rise by around 5% on 2020, reduced feed costs could still return producer margins to around breakeven.”