Pig market shows signs of seasonal changes
The signs of a seasonal change in the pig market have become apparent in recent weeks, according to the latest analysis by Quality Meat Scotland (QMS).
After falling by 7p/kg in January, the weekly declines in the GB Standard Producer Price (SPP) began to slow in February, sliding by around 2.5p during the month.
After a marginal decline in the week ending 5th March, the SPP then gained ground for the first time in 17 weeks, edging up by 0.25p/kg to reach a four-week high of 112.37p/kg dwt.
However, Iain Macdonald, senior economics analyst with QMS, has observed that this was still down by 15% year-on-year.
He said: “In the first quarter of 2016, farmgate pig prices followed their traditional seasonal pattern, sliding as supply increased in January, both from increased weekly slaughterings and higher carcase weights.
“Early this year, record carcase weights generated additional downward pressure on the market as mild December weather boosted growth rates, leading to extra supplies of pigmeat.
“As slaughter numbers and carcase weights eased back in February, the price declines slowed and then the market showed signs of stabilising into March, with the weekly kill and carcase weights continuing to edge lower.”
In terms of demand, January is traditionally weak as household budgets are tightened after the festive period. Sales then tend to recover gradually as Easter approaches.
Industry feedback suggests that this year has been no exception to this historic trend, and the recent lift in the SPP came two weeks before Easter.
Macdonald observed that a further signal of a better balance between supply and demand is that spot prices have reportedly firmed, narrowing the gap with contract prices.
He commented: “In addition to seasonal changes in supply and demand, the market is likely to have been affected by an improvement in the relative competitiveness of UK pigmeat against product from the rest of the EU.
“With farmgate prices stabilising on the continent, lower UK prices have seen the gap between the UK and EU average narrow from 30-40% in December to 12-15% in late February/early March. A lift in the value of the euro, due to weaker UK economic growth and the uncertainty caused by the upcoming referendum on the UK’s future in the EU, has also had an impact.”
As a consequence, UK pigmeat has become more competitive in price sensitive markets both at home and on the continent, and currency movements are likely to have made potential margins on exports look more attractive to UK processors.
However, the fact is that farmgate prices remain significantly lower than last year, with both the average price per kilo and per carcase down by 15% year-on-year.