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Pig Producers Benefitting from Seasonal Increase
Scottish pig producers are benefitting from the usual seasonal increase in prime pig prices. However, despite rising 2.5% over the past month, the current price is still 11 p/kg dwt lower than last year.
According to Stuart Ashworth, Quality Meat Scotland Director of Economics Services, the recent increase in price has come despite a five percent year-on-year increase in the volume of pigs reaching UK abattoirs and increasing carcase weights which has led to an increase in domestic fresh pork availability.
There is then an underlying strength of demand in the UK market. “That demand is underpinned in two ways,” said Mr Ashworth.
“Firstly, customs data indicates lower imports of pigmeat and pigmeat products and some growth in exports which, despite the growth in home production, resulted in lower overall availability on the home market.
“Secondly, Kantar Worldpanel retail purchase data shows growth in purchases of processed pigmeat, bacon, sausage and ready meals, but there has been reduced consumption of fresh pork, particularly roasting joints,” he said.
The changing demand for roasting joints may be the consequence of rising retail prices. This is a reminder that in the current climate of consumer nervousness and supermarket competition, passing higher prices along the supply chain remains a challenge.
“To successfully add retail value, all meat products increasingly need to reflect and demonstrate a matching of consumer values if premium prices are to be achieved. In a premium market these consumer values are increasingly associated with animal welfare, ethical production practices and proven provenance as well as eating quality,” observed Mr Ashworth.
European prime pig prices are also showing a seasonal upturn but are well below year-earlier levels. The level of shortfall against last year is much higher across Europe than in the UK.
Like the UK, said Mr Ashworth, European pigmeat production is growing but unlike the UK the EU is facing reduced export demand, particularly from China, which is putting pressure on producer prices.
Global trade is coming under pressure from expanding production in the USA which is expected to see a five percent increase in production during 2018. The US is the second largest supplier of pigmeat onto the global market after the EU, and following from expansion in production, is expected to grow its exports during 2018.
Meanwhile, with feed typically accounting for more than two-thirds of the cost of producing pigmeat, he said farmers are nervously reflecting on increases in spot and futures prices for grains and proteins. Global weather conditions, including drought in the grain belt of the US and similar water issues in Australia combined with an oversupply of water in Argentina, disrupting their harvest, is leading to higher future prices for grains and oilseeds.
“Domestically the late spring is contributing to strengthening grain prices as well. Consequently, the seasonal rise in prime pig prices is welcome but because of rising feed and energy prices margins are under renewed pressure,” concluded Mr Ashworth.