Higher prices and a slight downturn in the cost of feed wheat from earlier record peaks has given pig producers a little more optimism recently, consultant Peter Crichton writes.
But fortunes could be improved further if supermarkets passed on a fairer proportion of the higher retail prices.
Since the start of the year average prices received by European mainland pig producers have increased from 92.5p/kg to 126.55p/kg at the end of May – an increase of 36%. However, over the same period the gap between UK farm-gate and retail pig prices has continued to widen.
The National Pig Association claims that neither retailers nor processors are passing on a fair proportion of the higher retail prices to producers. As a result, a campaign is being launched to press for a supply chain audit to be undertaken by the Office of Fair Trading to find out what has happened to the missing margins.
According to the World Bank, international food prices have risen by 83% over the past three years. A joint survey by the Organisation for Economic Cooperation and Development and the United Nations Food and Agriculture Organisation predicts just a 20% rise in pork prices between 2008 and 2017. This is well behind predictions of 30% increases in sugar prices and 40-60% increases in wheat, maize and skimmed milk.
In the short-term, improvements in the value of the euro, which opened in January worth 73p compared with almost 79p today, will help increase the cost of pigmeat imports hitting the UK, as well as lifting values of exports, many of which include cull sow carcasses.
Forward forecasts point to further falls in EU pigmeat production levels. The UK breeding herd is predicted to fall 10% this year, but BPEX chairman Stewart Houston expects to see even bigger herd declines in mainland Europe. Indeed, the latest Danish census shows their herd has dropped by over 10%, with big falls in Poland, Hungary and the Czech Republic of 10–13%.
UK cull sow statistics for the first quarter of this year show a rise in slaughter levels of over 30%, indicating further falls in finished pig availability are likely in the fourth quarter of 2008.
While these production and price statistics paint a more optimistic picture for UK producers in the years ahead, this comes at a time when, due to unsustainable losses, the UK herd has fallen to less than 3.5% of the EU total.
Because of the long-term financial losses suffered by many producers, it is unlikely that much expansion will be seen in the domestic market. A lack of pig accommodation and a skills shortage, together with rising levels of bureaucracy, will also limit any significant growth in the UK pig herd and more imports will almost certainly be the result.