Private storage 2 – QMS says released product could cause trade to “cool”

A number of issues, including the future release of stored pigmeat, continue to hang over the 2015 market, despite the recent emergence of “some degree of stability” for the sector, according to the latest industry analysis from Quality Meat Scotland (QMS).

While noting that producer prices have “steadied” over the past three weeks at around 132.5p/kg, QMS head of economics services, Stuart Ashworth, draws attention to a similar steadying of feed prices, the lack of any indication of a softening of Russia’s import ban and the easing of PEDv in the US as reasons why production margins are once again being squeezed.

He also takes a look at the early impact of the European Commission’s private pig storage scheme, ending with the warning that the future release of product back onto the market could having a “cooling” effect on trade later in the year.

“The impact of lower producer prices on producer margins during 2014 was mitigated slightly by lower animal feed prices,” he said.  “However, more recently feed prices have stopped falling and further decline in pig prices is once again squeezing margins.

“Looking forward, census data for the UK and Europe points towards some further increase in production during 2015 and prices will remain sensitive to export opportunities. 

“There is also little evidence yet that Russia is thinking of relaxing its restrictions on European pigmeat and the US seems to have got past the worst of the PEDv disease and production is once again increasing, leading to more competition in Asian markets.”

On the private storage issue, he added: “The scheme has attracted considerable interest, particularly from the significant pigmeat producing countries of Spain, Denmark, Poland and Germany. These countries have collectively supplied 73% of the 40,000 tonnes or so of pigmeat placed into store since the scheme opened. Although this is a relatively modest quantity of meat, accounting for about 2% of monthly production, it has had some effect in supporting prices in those countries that have used it. 

“In general, European prices are some 7.5% higher than they were in late January although they have dipped again in recent weeks.  Nevertheless, on average, European producer prices are 10% lower than a year ago.

“One concern, however, will be that most of the pigmeat in store must come out after 90 days. This would be the beginning of June when prices should, based on historical trends, be higher but this extra supply may cool the trade.”