Producers of prime pigs have found some degree of stability recently after a period of declining prices, according to the latest analysis by Quality Meat Scotland (QMS)
Despite producer prices steadying over the past three weeks at around 132.5p/kg, prices are around 18% lower than this time last year. Pig producers will be hoping that this stability is followed by some price improvement in line with historic price behaviour which regularly shows growth in pig prices between February and June.
“It is not just Scottish producers who have been working in a declining market, so too has been the European pig farmer,” observed Stuart Ashworth, QMS Head of Economics Services.
“European pig producers saw a particularly steep decline in producer prices in autumn 2014. The principle reason for this was a combination of exclusion from the Russian market, which began a year ago, and a growth in pigmeat production of over 2.5% in the second half of 2014 compared to the year before.”
Over 2014 European pigmeat exports fell by 5% while annual production increased by 1.4%. Not surprisingly, said Mr Ashworth, this change in supply and demand balance led to pressure on producer prices.
This pressure continued into spring 2015 and resulted in the European Commission introducing private storage aid in early March. This aid involves the Commission paying the storage cost for pig meat put into cold store for a minimum of 90 days.
“The scheme has attracted considerable interest, particularly from the significant pigmeat producing countries of Spain, Denmark, Poland and Germany. These countries have collectively supplied 73% of the 40,000 tonnes or so of pigmeat placed into store since the scheme opened,” said Mr Ashworth.
“Although this is a relatively modest quantity of meat – accounting for about 2% of monthly production - it has had some effect in supporting prices in those countries that have used it.
“In general European prices are some 7.5% higher than they were in late January although they have dipped again in recent weeks. Nevertheless, on average European producer prices are 10% lower than a year ago.”
One concern, he said, will be that most of the pigmeat in store must come out after 90 days. This would be the beginning of June when prices should, based on historical trends, be higher but this extra supply may cool the trade.
Scottish producers did not benefit directly from the European price recovery as, although prices stabilised, they have not increased.
“The UK market remains well supplied. Higher slaughter numbers and heavier carcass weights meant production increased at the same time exports declined and, although imports also declined, available pigmeat increased.
“However, despite the strength of sterling and low European prices, pigmeat has not flowed into the UK. This suggests some loyalty among UK consumers for UK pigmeat,” said Mr Ashworth.
The impact of lower producer prices on producer margins during 2014 has, he said, been mitigated slightly by lower animal feed prices.
“However more recently feed prices have stopped falling and further decline in pig prices is once again squeezing margins,” stated Mr Ashworth.
“Looking forward, census data for the UK and Europe points towards some further increase in production during 2015 and prices will remain sensitive to export opportunities.
“There is little evidence yet that Russia is thinking of relaxing its restrictions on European pigmeat and the US seems to have got past the worst of the PEDv disease and production is once again increasing, leading to more competition in Asian markets.”
