Commodities outlook 2015: Pigs

Pig prices have fallen sharply over the past 12 months, with higher supplies and subdued demand depressing markets across the EU.

Fortunately, feed costs have weakened accordingly, meaning producers have managed to make positive margins, on average, since mid-2013.

“However, producers remain cautious and the industry has not completely recovered from sustained losses over several years,” says Andersons consultant Lily Hiscock.

See also: Farmers Weekly’s Pig Farmer of the Year

“As a result there is a reluctance to invest in expansion.”

The UK June census saw a 1.3% decrease in pig numbers to just over 4.8m in 2014, and a drop of 3.9% in the UK breeding herd to 502,000.

But improvements in productivity are likely to offset that decline, and production could rise in 2015.

“With the Russian ban on imports set to continue, little contraction in production forecast and weak consumer demand, there seems little prospect of EU prices increasing much,” says Miss Hiscock.

The gap between UK and EU pig prices widened to €32/100kg (25p/kg) in early December, which, combined with the strong pound, has made imports look increasingly attractive.

“The commitment of UK retailers to domestic product will be tested if the gap grows too wide.”

Fortunately, export trade has also grown, led by shipments to China and other Asian markets.

“UK producers should use their high production standards to their advantage, promoting high welfare as part of their marketing strategy in the UK and worldwide,” she says.

UK producer margins remain positive for now but even small movements in pig price and feed costs can affect profitability.

“Estimates for global cereal and protein production look high, which should ensure the outlook remains reasonably positive through 2015.”

Outlook

  • Price pressure to continue
  • Disease challenges mean biosecurity will be critical
  • New UK monogastric centre of excellence will help producers improve technical efficiency

Business pointers

  • Manage volatility by locking into feed prices
  • Set realistic technical targets and push output per sow
  • Look after your labour – keeping good staff on pig units can be difficult

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