Topical commentary on the pig sector from independent consultant Peter Crichton.
The UK pig industry may be facing a brighter future than it did a year ago. In January 2011, ex-farm feed wheat was trading at an average of £196/t, compared with £138/t today.
Every bacon pig produced will consume an estimated 250-300kg of feed during its gestation, rearing and finishing period. With feed costs at current levels, this £60/t drop in wheat prices represents an overall saving to the industry of more than £15 a pig produced, or a benefit in production costs of 20p/kg deadweight compared with costs in early 2011.
Pig prices are also at slightly more positive levels than they were 12 months ago, with the current Deadweight Adjusted Pig Price of 145.42p/kg, almost 6% higher than a year ago.
Although European pigmeat prices have fallen since Christmas, European mainland average prices are still 8% up on the year, limiting the extent to which cheaper imports are able to undercut the UK market.
However, the value of the euro will remain a key factor in determining not only imports but also the returns from UK pigmeat exports, including an estimated 90% of cull sows.
Total EU pigmeat exports during the first 10 months of 2011 were estimated at 2.66m tonnes, which represents a 21% rise on the previous year.
Opportunities for exporting the pigmeat “fifth quarter” product are also helping some major processors to add value, which should in turn improve producer prices.
UK pig producers will also be keenly studying the retail effect of the battery cage egg ban that came into effect throughout Europe on 1 January this year. However, 14% of total EU egg production is forecast to be “illegal”.
The way in which major UK supermarkets react to the battery cage egg ban will provide valuable pointers for when EU pig welfare legislation requires a partial sow stall ban from 1 January 2013.
However, the stall ban will still allow their continued use for four weeks, equivalent to 25% of the gestation period.
BPEX research expects varying degrees of compliance, especially in parts of southern and eastern Europe where alternative sow accommodation is not yet available.
The NPA is urging retailers and food service companies to ensure that no non-compliant product is included in their supply chains, but it remains to be seen to what extent retailers will endorse this in a highly competitive market.
Cheaper feed prices may also be under threat from a weaker dollar – encouraging some speculators to invest in commodities rather than currencies – as well as from weather concerns in some South American countries.
The latest LIFFE wheat futures quotes are tending firmer, with March closing at £157.25/t and July at £158.65/t on Tuesday (17 January).
Following the trends seen in the June 2011 annual census, pig availability in 2012 is likely to remain at generally similar levels, with the English breeding herd up by a modest 2% to 433,000 head.
The European mainland pig herd is reported to have fallen by 4.1% between June 2010 and June 2011, although higher productivity has meant the number of slaughter pigs has fallen by a smaller proportion. If this trend continues, coupled with higher exports to non-EU countries, pigmeat margins should remain relatively firm in the year ahead.
The 2012 London Olympics should also help to improve barbeque and catering demand, including sausage production, and reports are being received of large volumes of product being put into cold store to meet this need.
Finally, UK pig finishers will be looking at ways in which the much-criticised shout price system adopted by the five major abattoirs can be improved or replaced with a more transparent and market-oriented contract slaughter pig pricing system.
Pigmeat market outlook
• Lower feed costs helping to reduce overall production costs but vulnerable to currency movements and crop prospects
• Pig exports rising but vulnerable to volatile currencies
• Firm outlook, provided numbers are kept under control and UK export growth outside EU continues
• Slight growth in size of English pig breeding herd countered by reduction in mainland Europe’s pig numbers
• Attitudes to enforcement of cage ban in poultry market will indicate likely attitudes to enforcement of partial stalls ban in January 2013
• Cold storage of pigmeat under way to meet Olympic demand
• Contracts need transparency and to be market-oriented.