Farmgate prices remain firm for Scottish pig producers
For much of 2020 the volume of pigmeat leaving UK abattoirs has been lower than year earlier levels, a contributory factor in the firmness of farmgate prices, according to the latest market commentary from Quality Meat Scotland (QMS).
However, June and July broke this trend with year-on-year increases in production which, in turn, led to farmgate prices softening.
Stuart Ashworth, director of economics services at QMS, said: “Latest estimates for UK production show volumes have once again dipped below year earlier levels.
“Despite this slight tightening in supplies, UK prices have continued to drift downwards through August and into September.
“Nevertheless, Scottish pig producers find farmgate prices remain 5% higher than last year and 9% higher than in 2018, with heavier carcase weights resulting in larger increases in the value of each pig sold.”
In contrast to the UK average farmgate prices, across Europe they are much lower than last year, and also much lower than the five-year average, according to QMS.
Ashworth continued: “With the UK price significantly higher than elsewhere in Europe, some of the fall in UK prices, despite lower production, may be accounted for by competitiveness of European prices.”
Keeping an eye on ASF
In this regard, UK pigmeat producers are keeping a wary eye on the implications of the conformation of African Swine Fever (ASF) in Germany.
Although not unexpected because of the presence of ASF in Poland, close to the German border, the conformation of ASF in Germany could be very destabilising for the European and UK market.
One consequence of ASF is that most importers of pig meat immediately suspend all imports from countries with ASF. This has proven to be the case with significant importers of German pigmeat like China, Japan, South Korea all suspending imports from Germany.
Germany is hoping that China, in particular, may be persuaded to adopt a regionalization policy where regions within a country can be considered to be ASF-free and trade can continue and mitigate the impact of the restrictions on exporting to China and elsewhere.
Ashworth added: “This is the policy adopted internally within the EU and which would allow pigmeat from some parts of Germany to be exported to EU countries.
“As the UK is still transitioning out of the EU, current EU rules still apply and, consequently, German pigmeat could continue to be available in the UK.”
EU pigmeat exports
A further mitigating factor may prove to come from the recent, rapid growth in EU pigmeat exports.
EU exports, excluding those from the UK, increased by 750,000 tonnes in 2019 and continued to grow in the first half of 2020 while, at the same time, production declined slightly and European consumption of pigmeat fell.
“Consequently, with other EU countries well-placed to take some of the room in international markets left by Germany, an increased volume of German pigmeat on the European market may not significantly increase the overall volume of pigmeat on the European market,” said Mr Ashworth. This could limit any price fall needed to balance supply and demand across Europe.
“However, in turn, this may depend on whether previously large importers from Germany look to secure their requirements from elsewhere in Europe or to competitors such as Brazil, Canada or the USA.”
Ashworth concluded: “Nevertheless, in the short-term, farmgate prices across Europe are like to come under pressure until the inevitable consequences of Germany being prevented from exporting pig meat outside of the EU, become clearer.”