The recent strengthening of the pound and the drop in continental prices could sound a “note of caution” around prospects for pig prices into 2017, according to a price forecasting update published by AHDB Pork.
While concluding that the outlook for the industry still looks positive in other respects, AHDB Pork warns that the big variable of exchange rates continues to be a major factor.
The updating exercise was applied to a detailed analysis of market factors which the organisation undertook in April this year, a point at which pig prices were at an eight-year low. While the market model at the time correctly forecast the rise in prices seen this year, AHDB Pork’s new analysis reveals that the real market has moved two or three months later than the April-based model.
A lot has changed since April, of course, pointed out AHDB Pork, with the Brexit vote meaning, in particular, that exchange rates are now more volatile and likely to continue to remain so.
The euro/sterling exchange factor was judged in April, in fact, as capable of having around a 5p a kg impact on prices between January and September 2016. However, with the value of the pound also influencing both the EU pig price and the price of imported pork in sterling terms, it has now been concluded that the overall effect of the exchange rate may have been as high as 19p/kg.
That is more than half of the rise forecast in the original modelled price, contributing strongly to AHDB Pork’s “note of caution” over what might now be in store for next year.