ENCOURAGING SIGNALS augur well for the pig sector in 2005, but the industry will still face big challenges in the next 12 months.

The deadweight average pig price has moved little since September, hovering around the 100p/kg mark, but still ends 2004 about 4p/kg down on the same time last year.

But while no one predicts a sudden leap in pig prices, many are confident the DAPP will average about 105p/kg in 2005.

This was the first full year of trading under the DAPP system, which replaced the old Euro-spec average, and is, by its nature, a slower-moving price.

This is due to its links to cost-of-production contracts, often set to an average figure over six months.

Higher EU pigmeat values, and a weaker pound at the beginning and end of the year, helped to limit the effects of imports on UK supplies.

Feed wheat prices were on the pig producer‘s side this year, with the poor harvest ensuring a bountiful supply of feed wheat and a £60/t price set by world markets.

Values are likely to remain relatively cheap until old crop supplies dwindle and new crop plantings are estimated.

Currency values, helped by a good harvest, have made soya supplies more affordable. The weaker dollar has meant greater buying power for British pig farmers.

Exports will still be important to the pig sector in 2005, and increased demand from Russia and the new EU accession states should help to bolster the market.

So the sector should be able to look forward to a better bottom line from 2005, even if pig prices do not vary significantly.

Production is expected to rise by 3% next year on the back of better sow productivity, and traders are confident of building on export gains which rose 5000t on the year.

Another key challenge will, of course, be the battle to displace imports. While imports rose this year to 286,000t, many in the sector expect this to remain static or indeed, decline.