Pig farmgate prices steady following extended volatility

Farmgate pig prices have returned to a traditional seasonal pattern in 2017, following considerable volatility in recent years. 

According to data from Quality Meat Scotland (QMS), since reaching its 2017 peak of 165p/kg dwt in the final week of July, the GB Standard Pig Price (SPP) has fallen in 10 out of 11 weeks, slipping to 158p/kg in the second week of October. 

Iain Macdonald, QMS senior economics analyst, said that over this period prices decreased by 4% and were at their lowest since the opening week of May. However, the market was still 9% higher than in the same week of 2016. 

“A look at the weekly price reports indicates that the market has responded to a seasonal change in supplies,” he said. “Indeed, the number of pigs processed by abattoirs that report into the SPP rose by 5% between the end of July and mid-October.”

Carcase weights increased by 2.5%, which meant that pigmeat production climbed by 7.5%. 

As well as growing seasonally, carcase weights have remained well above 2016 levels.  Consequently, the 9% annual increase in per kilo producer prices was actually 12.5% on a per carcase basis.

“When considering the market conditions faced by pig producers, it is important to look at the cost of inputs as well as the price they receive for their outputs,” said Macdonald. “Feed is the principal input cost involved in pig production and the price of feed wheat and feed barley in north-east Scotland has been unusually stable for most of 2017, trading at around £140/t for the former and £115-£120/t for the latter.” 

Last year, the cost of grain fluctuated more and although it was around 7% lower in mid-October 2016, prices were on the increase through the second half of 2016, meaning the year-on-year increase has narrowed in recent weeks from above 20%. 

For soya meal, worries over a delay to the soya bean harvest, plus lower-than-expected yields in the US have seen global prices pick up by 3% since September, but Macdonald said that, at £305 per tonne, imported Brazilian soya meal was still 8% cheaper than a year earlier. 

“Overall, then, the combination of firm farmgate prices and relatively stable feed costs have given pig producers favourable market conditions. 

“In turn, this confidence has resulted in some herd expansion in Scotland with the June census in Scotland reporting a 3.5% increase in sow numbers to a six-year high of 32,000 head,” he added.

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