The combination of a weak euro and retail demand running below supply goes a long way to explaining why pig prices are currently low says AHDB Pork, adding that at least one of these factors will need to change for prices to recover significantly.
Prompted by GB pig prices having recently dropped to their lowest level in over six years, AHDB Pork has been studying industry history in a bid to explain what’s happening and assess what it will take to turn prices around.
“A strong pound makes imported pigmeat cheaper, which inevitably puts pressure on domestic prices,” said AHDB Pork. “In addition, it makes UK exports less competitive on the EU market.
“Although international markets are generally priced in US dollars, UK product is competing against meat from the rest of the EU here too. That means that either export volumes or prices will be lower in sterling terms, hitting farmgate prices in the process.”
However, while the exchange rate clearly has a strong influence on pig prices, it is not the only factor, added AHDB Pork, pointing out that price levels will always be determined by supply and demand.
According to the recently-updated MeatStats tables, published by AHDB, UK pigmeat production has been rising over the last decade, an increase which has been balanced to a large extent by rising exports. This year, however, may be “more difficult” due to the exchange rate factor.