The sector saw much-improved deadweight prices in 2017, which peaked in July at levels last seen more than three years earlier.
Prices have tapered off slowly since, as increased domestic supplies coincide with subdued demand.
However, with little sign of a sustained strengthening of sterling, producers can remain optimistic going into 2018 that these relatively high prices will be sustained, says Andersons consultant Jonty Lister.
Medium- and longer-term prospects for the industry remain uncertain, he adds. “The most important factor will be the future trading relationship the UK has with the EU.
“The pig industry is indirectly supported via significant import tariffs (€50-€150 per 100kg) on products from outside the EU. These make most imports of pigmeat uncompetitive in the single market.”
- Relatively buoyant deadweight prices look set to continue into 2018
- Prospects further ahead remain uncertain and will be dictated by the UK’s post-Brexit trading relationship with the EU
- Producers need to address production costs and use the current period of increased returns to reduce borrowings and reinvest
If the UK and the EU retain tariff-free access to each other’s markets after Brexit, then output price dynamics would not be seriously affected, says Mr Lister. If no deal is concluded, trading will default to WTO rules, which would have a significant impact on the UK pig industry.
Future marketing campaigns should focus on the high welfare standards of British products to suppress cheap imports.
About 40% of the UK pig herd is kept in outdoor systems, which tend to lag behind indoor units for productivity gains, says Mr Lister.
In addition, producers should concentrate on reducing costs of production, he says. “As InterPig reports, in 2015 UK production costs averaged £1.33/kg dw, compared with £1.18/kg in the EU and £0.80/kg in the USA. This presents a major challenge for UK producers.”
UK rearer and finishing systems should target a feed conversion ratio (FCR) of 2.0-2.3. The top 10% in the UK achieve an FCR of 2, while the average is 2.4.
Businesses should also regularly record and monitor margin over feed, with feed estimated to be 55% to 60% of production costs in the UK, but nearer 50% in Denmark, for example, largely because of better FCRs.
Greater use of technology to record all key performance indicators could improve management, as could risk management options, particularly forward-buying of feed.
Farmers Weekly says…
Rhian Price, livestock editor
With prices continuing their descent, a sharper focus on production costs and benchmarking will be needed to keep things on track.
Responsible Use of Medicines in Agriculture (Ruma) has set strict yearly targets for antibiotics reduction, although significant progress is already being made by many pig producers in this area. Farmers will now have to record antibiotics using the electronic medicine book, and biosecurity and in-feed medication will be big focus areas.
The above is based on Andersons Outlook 2018. Copies of the full publication can be downloaded from www.andersons.co.uk by clicking on ‘Publications and Events’ or by requesting a printed copy on 01664 503200.
Andersons is running a series of seminars in the spring, looking at the prospects for UK agriculture in greater detail. For more information, please go to www.theandersonscentre.co.uk/seminars.
2 March – RAF Club, Piccadilly, London
6 March – Harper Adams University, Newport, Shropshire
7 March – Castle Green Hotel, Kendal, Cumbria
8 March – Carfraemill Lodge Hotel, Lauder, Berwickshire
9 March – York Racecourse, York, North Yorkshire
13 March – Yew Lodge Hotel, Kegworth, Leicestershire
14 March – Perth Racecourse, Perth
16 March – Newmarket Racecourse (Rowley Mile), Newmarket, Suffolk
20 March – Royal Agricultural University, Cirencester, Gloucestershire
21 March – Exeter Racecourse, Exeter, Devon
22 March – Salisbury Racecourse, Salisbury, Wiltshire
23 March – East of England Showground, Peterborough, Cambridgeshire