UK pig prices look set to remain firm for some time to come according to Quality Meat Scotland (QMS) economist, Stuart Ashworth.
That’s a view based on the fact that Sterling is expected to remain weak, and possibly weaken further in a “febrile” money market, while the domestic trade continues to be helped by falls in European pigmeat supplies and strong demand from China.
With UK farmgate prices for prime pigs currently at their highest since December 2014, Mr Ashworth (pictured above) highlighted the “beneficial effect” of Sterling’s weakness on current trading levels, in his latest market analysis.
“This has meant that pork and pigmeat products imported from Europe have become more expensive and are therefore not a constraint on UK producer prices to the extent they have in the past,” he said. “Similarly UK exports of pigmeat have become more attractive without having to bid down domestic prices.”
He also stated, however, that other market fundamental influences are current “at play”, with strength in the domestic farmgate price being achieved at the same time as UK pigmeat production has been increasing.
“Slaughter statistics show UK prime pig weekly slaughterings have changed little compared with the previous year, during the past quarter,” he said. “However, because of increased carcase weights, the volume of meat produced has increased slightly.
“In the retail market, meanwhile, Kantar Worldpanel research shows retail sales of pork and pork products struggling to match year-earlier levels despite lower retail prices.”
As such, domestic retail sales are not driving farmgate pig prices at the moment.
“What is driving prices is changed trade patterns and market balance in other parts of the world,” said Mr Ashworth, adding that declining sow numbers in Europe, as reported in December 2015, are beginning to be reflected in prime pig slaughterings.
“The May and June census results from across Europe show the EU had a reduced population of 20-50kg piglets at that time,” he said. “In addition, European slaughter figures show a decline in prime slaughterings during August and an expectation of production to fall further in the final quarter of 2016.
“This tightening of European production is also likely to continue well into 2017 because the breeding herd reported in the May and June census showed further a decline in all major pigmeat producing countries.”
Turning to China and its impact of EU/UK pig prospects, he added that current all indications were that the breeding herd there has declined in recent years, leading to a doubling of Chinese imports over the past 12 months and an expectation for imports to continue at current levels well into next year.
“EU trade data shows exports to China almost doubling over the first half of 2016 compared to the same period last year,” he said, with EU exports to Hong Kong, Japan and the USA having also increased significantly.
“This growth has more than offset the loss of market in Russia. The UK too has benefited from access to China with exports there increasing by 68% in August alone and by around 70% since the start of the year.”
The UK also remains a significant importer of pigmeat and pigmeat products, of course, even with the current weakness of Sterling. The difference at present, however, is that today’s currency factor means rising imports are not acting as a brake on UK producer prices, all of which leaves Mr Ashworth with his conclusion that UK pig prices will remain firm for some time to come.