Falling EU pig prices are continuing to put pressure on the UK market, with the differential currently standing at around 25p/kg.
The latest UK EU Reference Price (which differs from the SPP and APP) of 148.4p/kg compares with the EU reference price of 123.3p/kg. Even with the various deductions to the UK price taken into account, the difference is around 19/20p/kg.
Updating the NPA producer group at its latest meeting in London on Tuesday, AHDB Pork strategy director Mick Sloyan said the European market had fallen away a lot more quickly than had been anticipated. This is mainly is due to a weakening of the export market and higher numbers coming through to slaughter.
He said that continues to put downward pressure on our market and is the primary reason for the fall in UK pig prices in recent weeks.
But in terms of the UK market, there was very little evidence that the expected rise in slaughterings in the fourth quarter of 2017 happened. There has been an increase in carcase weights pushing production, but the number of pigs killed does not appear to have risen.
“There are further falls to come, probably. At this time of year, it always happens and we usually see the market tightening up as we move through March, but it very much depends on what happens in Europe,” he said.
EU price falls
EU pig prices have been declining for some time. In each of the four weeks to 31 December 2017 EU pig prices dropped, to close the year at €139.67/100kg, a €5.76/100kg fall over the given period.
The New Year has brought some stability, with prices averaging around €139.51/100kg in the week ended January 7. Although these seasonal price pressures are typical for this time of the year with a large supply and a repressed demand, EU prices are down €12.37 on the equivalent week last year.
At country level, price deflation was seen across almost all member states, recording continual price drops over the past few weeks. The German pig price recorded one of the largest declines, standing at €8.39/100kg lower than the four weeks prior to the week ending January. Denmark recorded a price fall of €7.31/100kg. In contrast, other major producers recorded much less drastic declines over this period including France (€4/100kg) and Spain (€1.15/100kg).
The trend for the UK was in line with the EU pig price movements, also falling successively over the past four weeks. But The UK pig price fell less than the average to €167.94/100kg for the week ended January 7.
As such, the gap between the UK and EU average reference price has widened to around to €28.45/100kg for the past two weeks, the largest gap since the same period in 2016. In sterling terms, the fall in pig prices is lessened by the weakening of the pound against the euro.