Pig prices strengthen as supplies tighten

Pig prices strengthen as supplies tighten

After struggling with a long period of low profitability followed by the closure of the largest pig abattoir in Scotland, there are encouraging signals for improving prospects for Scottish pig producers. Planned investment in the Brechin abattoir and pig prices at their highest level for over a decade are among the many factors supporting this positive outlook.

Recent census results from across Europe reveal the European sow herd continues to decline, falling 1.8% over 2013 and down 20% over the past decade. Alongside the decline in sow numbers, the European commission forecast pigmeat production in the European Union to fall 1.4% during 2014, observed Stuart Ashworth, QMS Head of Economics Services.

“This steady decline in pigmeat production has supported a steady increase in European pig prices over the past couple of years,” said Mr Ashworth. “Although prices have fallen back from the highs of 2013, EU pig producers are still benefiting from prices well above the long run average.”

European pigmeat price movements show the international nature of the pigmeat market, and indeed the whole red meat market, and these prices fell significantly during February and early March.

“A contributory factor here has been the closure of the Russian market to European pigmeat,” commented Mr Ashworth.

“Although Russia’s importance to the European market has declined over the past few years, it was still the largest export market in 2013 accounting for almost 25% of all EU pigmeat exports. Over the first two months of 2014, EU exports to Russia fell 60% as the market closed.”

However since mid-March European pigmeat prices have been rising. Once again the main driver has been a change in international trade.

“European pig processors have benefited from increased market opportunities in the wake of the growing prevalence of Porcine Epidemic Diarrhoea (PED) in the United States. This is expected to result in a fall of 6-8% in US pigmeat production in the third quarter of 2014 and has already led to the US having less pigmeat to export,” said Mr Ashworth.

“Consequently, over the first two months of 2014, EU pigmeat exports to South Korea, Japan and the Philippines – all important US markets – have increased by more than 50%.”

Meanwhile, although down slightly over January and February, China has increased its imports of pigmeat. In 2010 China accounted for 8% of EU pigmeat exports but this rose to 21% in 2013, taking it to being second only to Russia.

During the, hopefully temporary, closure of the Russian market, China has become the most important export market for European pig meat, observed Mr Ashworth.

Within the UK, pig prices have reflected the European trend, dipping slightly in late February and early March before seeing some growth into April. However, unlike mainland Europe, UK producers continue to benefit from higher prices than 12 months ago.

“The easing of UK prices during February possibly reflects the increase in pork imports that occurred during the month as pigmeat became available that would otherwise have been shipped to Russia, although this was partially offset by reduced bacon imports,” said Mr Ashworth. “As growth occurred in Asian demand, prices in the UK also recovered.”

Despite political tensions with Russia and with no turnaround likely in the US situation in the medium-term, the outlook for the Scottish and European pig sector remains positive.

“In recent years, pig price increases have been rapidly eroded by increases in the cost of inputs, particularly feed, and producers have struggled to sustain margins,” commented Mr Ashworth. “However, a further factor supporting an expectation of improved prosperity in the pig sector is the latest International Grain Council forecast of a modest growth in Soya bean production in the 2014/2015 year which should help to control feed costs in the medium-term.”

Previous / Next posts...