Scottish pig prices reach nine-week high

Farmgate pig prices in Scotland have strengthened after a period of downward seasonal pressure during the early parts of 2017.

Analysts from Quality Meat Scotland’s (QMS) economics services team said the Great British standard pig price (SPP) started 2017 by sliding slightly in seven out of the eight weeks of the year. Prices slipped from 151.9p/kg deadweight (dwt) at the end of 2016 to 149.6p/kg in the week ending 25 February.

Following on from three consecutive weekly gains, prices increased to a nine-week high of 151p/kg in the third week of March. Compared to a year previous, this is an increase of 35%.

“While this impressive year-on-year increase will be of comfort to producers, it should be noted that the market remains below the levels of March 2014, while feed prices have also risen sharply over the past year,” commented Iain Macdonald, QMS senior economics analyst.

“The combination of firm home and global demand for wheat, lower EU production in 2016 and currency movements have seen feed wheat trading 40-50% more expensive than last spring,” he said. “Soya meal is also up, by more than a fifth, mainly down to a weaker sterling against the US dollar.

“A key barometer of the prevailing market conditions is the spot price available to producers for pigs outwith regular contractual deliveries.

“Whenever spot prices fall below contract levels it points to a well-supplied market,” explained Macdonald. “However, at times when processors are having to seek supplies from outside their regular scheduled deliveries, the spot market will firm.”

He added that while sources indicated that spot prices were falling until early February, they had risen to above contract levels by the start of March. This represents tight supply relative to demand. As a result, the recent lift in SPP has come as a surprise.

The price reporting of prime pigs has been falling seasonally, with the three week rolling average number of pigs contributing towards the SPP 5% lower in the third week of March than it had been at the end of January.

“Furthermore, carcase weights have been following a seasonal downturn over the same period, with the three-week average slipping from 84.4kg to 84.1kg – adding to the fall in pigmeat supply. Lower carcase weights mean that, at £126.75, the average price per carcase remained 0.5% below its year-opening level, whereas the price per kilo was down by only 0.1%,” added Macdonald.

“However, bacon, sausages, sliced-cooked meats and pork-based ready meals did show some growth. Perhaps it is demand for these processed products that has been underpinning the farmgate price in recent weeks.”

Meanwhile, on the continent, similar price trends have been reflected in the first quarter of 2017. According to Macdonald, the supply and demand balance is favouring producers. This is likely to continue in the coming weeks.

France, Spain and Holland have seen the strongest increases in late February to early March, with prices pushing ahead of their 2016 ending levels by 6-9%. Germany and Poland experienced more subtle increases at 3-4%, while prices in Denmark and Italy are yet to fully recover after falling in January.

Macdonald said: “Across the continent, producer prices are well above March 2016 levels, averaging 23% higher in euro terms at €1.54/kg dwt (134p/kg). This is around 10% below the UK average.

“Driving the EU market has been tight supplies after the consolidation of the sow herd in response to the challenging market conditions of the past couple of years, coupled with firm export demand from Asia, most notably China.”

Data from Eurostat shows that the sow herd across the five largest EU pig-producing nations contracted by 2% in the year to December 2016, with EU export volumes rising by nearly one-third in 2016 to 2.3 tonnes.

“Within this total, shipments to China expanded by 86% to 966,500 tonnes. They followed the seasonal profile, rising through the spring and peaking in the summer before falling back again, helping to stabilise wholesale pork prices in China, which had been running nearly 50% above 2015 levels during the spring of 2016.”

In Scotland, the sow herd is estimated to have expanded by 1.5% to a six-year high of 37,800 head, although gilts retained for future breeding fell by almost 30%.

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