Pig prices up again but margins are held back

Pig prices in the UK have risen again this week but increases in labour and feed costs through the first quarter of 2020 have restricted margins.

During the week ending 23 May, the EU-spec SPP continued up, with a 0.17p/kg increase on the previous week, according to AHDB Pork figures.

The rise brought the average to 164.51p/kg, which is 19.17p/kg above the same week last year.

See also: African swine fever threat: What farmers need to know

The EU-spec APP also continued upwards, with the price for the week ending 16 May averaging 167.63p/kg, up 0.36p on the week.

After sharp falls in prices on the continent during the coronavirus crisis that have not been mirrored here, the UK now commands the highest deadweight pig price in Europe, with prices in Germany falling by about 34p/kg from their peak at the end of March to 146p/kg this week.

Throughputs up

AHDB analyst Hannah Clarke said reports showed strong demand up to the bank holiday on Monday (25 May), with coronavirus staffing issues having only a limited effect on overall throughputs.

Estimated throughputs were 163,000 head, up 3,600 head (2%) on the previous week.

Weaner prices also rose in the week ending 23 May, as demand improved. Prices for 7kg weaners rose £1.05 to average £42.86/head, while 30kg weaner prices rose £2.09 to average £59.92/head.

The strong market reflects continuing global shortage due to the African swine fever crisis in China and the coronavirus pandemic blocking the US supply chain (see box).

Margins narrowing

However, AHDB dairy and livestock analyst Felicity Rusk said an increase in feed and labour costs over the period had eroded some potential margin gains.

Over the first three months of 2020, the EU-spec APP averaged 165p/kg, she said.

Meanwhile, the average cost of GB pig production was 149p/kg, according to the latest AHDB estimates.

Therefore, in Q1 2020, the estimated net margin was 16p/kg or £14/head, she reckoned.

But production costs were 3p/kg higher than in the previous quarter.

“This is due to a combination of higher feed and labour costs. While there was a 1p decline in ‘other’ variable costs, this was not enough to compensate for the rise in feed and labour costs,” she said.

US situation grim

The resilience of the UK pork sector is in sharp contrast to conditions in the United States, where farmers are facing a deepening crisis as the coronavirus pandemic continues to hold down abattoir output.

Abattoir closures mean an estimated two million finished pigs are stranded on farms with no buyer, according to US economist Steve Meyer of Kerns and Associates.

The backlog is continuing to grow, and with no way of accommodating the excess pigs, farmers may have no option but to destroy their animals.

Officials in Iowa, the largest pig producing state, have pledged to pay up to $3.6m (£2.9m) a farm to compensate for incineration and disposal costs, with other states likely to take up the initiative.

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