UK Prime Pig Prices Expected to Remain Firm

Farmgate prices for prime pigs currently stand at their highest level since December 2014, according to the latest analysis by Quality Meat Scotland (QMS).

Following steady, week-on-week increases since the low point of March 2016, pig prices have risen by 28%, and currently stand 12.5% higher than 12 months ago.  

Sterling weakness has had a beneficial affect by making the UK average price lower than the European average price, when quoted in Euros, observed Stuart Ashworth, QMS Head of Economics Services.

“This has meant that pork and pigmeat products imported from Europe have become more expensive, and therefore have not been a constraint on UK producer prices to the extent they have in the past.  Similarly UK exports of pigmeat have become more attractive without having to bid down domestic prices,” said Mr Ashworth.

However, there are other market fundamental influences at play as well.  Strength in the domestic farmgate price has been 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. However, because of increased carcase weights, the volume of meat produced has increased slightly,” he added.

In the retail market, Kantar Worldpanel research shows retail sales of pork and pork products struggling to match year-earlier levels despite lower retail prices. 

“Domestic retail sales are therefore not driving farm gate pig prices at the moment.  What is driving prices is changed trade patterns and market balance in other parts of the world,” commented Mr Ashworth.

In Europe, the declines in sow numbers reported in December 2015 are beginning to be reflected in prime pig slaughterings.

The May and June census results from across Europe show the European Union had a reduced population of 20-50kg piglets at that time. 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,” said Mr Ashworth, “is 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.” 

Across the globe in China, all indications are that the breeding herd there has declined in recent years. This has led to a doubling of Chinese imports over the past 12 months and an expectation for imports to continue at current levels well into 2017. 

European Union trade data reports exports to China almost doubling over the first half of 2016 compared to the same period last year.  European Union exports to Hong Kong, Japan and the USA have 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. Indeed this has reached the point where China has overtaken Germany as the biggest market for pork from the UK,” Mr Ashworth said.

The combination of tightening supplies across Europe and growth in exports has contributed to average farm gate prices across the EU increasing by some 25% since May.  Normally European pig prices cool between September and January and the most recent week’s prices in Europe have dipped slightly but remain some 13% higher than a year ago.

The UK remains a significant importer of pigmeat and pigmeat products, observed Mr Ashworth, and at the same time as UK exports are increasing there has been some growth in imports. 

“The weakness of Sterling and the rise in European prices to a point where they are above the UK average producer price, however, means that imports are not acting as a brake on UK producer price. 

“With Sterling expected to remain weak, and possibly weaken further in a febrile money market, falls in European pigmeat supplies and strong demand from China are likely to mean that UK pig prices will remain firm for some time,” concluded Mr Ashworth.