Pig margins still negative but outlook brighter

Since the start of 2013 the UK Deadweight Average Pig Price has fallen from 160.87p to 158.24p/kg and weekly contract shout prices have also fallen by an average of 6p/kg, equivalent to £4.50 a bacon pig.

Producers had been hoping that the EU mainland partial sow stall ban would have had a greater effect by now in reducing supplies of imported pigmeat and putting up the price of the domestic product.

With more herds being culled and units closed down, the industry badly needs further marketing initiatives or the size of the UK breeding herd will continue to dwindle.

UK pig production now only accounts for about 3.5% of the EU-27’s slaughter output. UK pig slaughterings will be lower this year than in 2012 due to further falls in the size of the national breeding herd since July 2012, caused by higher feed costs.

Evidence of this will come with DEFRA’s December Pig Census – results due soon. However, BPEX suggests that even allowing for improving sow productivity, overall UK output will fall by a further 2% over the year, with a greater drop in the second half of the year.

Net slaughter prices for Red Tractor pigs are generally lower than 160p/kg but BPEX reckons that very few UK farrow-to-finish systems can operate at cost of production much lower than 170p/kg dw.

BPEX chief Mick Sloyan recently predicted that prices will rise to around 170p/kg at the top of the market and should average around 164p/kg for 2013 as a whole.

Although EU mainland and UK pig markets are not currently faced with rising numbers of pigs, retail demand remains fickle with consumers on tight budgets. There is also potential fallout from the recent horsemeat scandal.

Some consumers will be wary of all meat products rather than just ready meals at the discount end of the system.

National Pig Association (NPA) chairman Richard Longthorp has also expressed concern over the possible resurgence of foot-and-mouth or other notifiable diseases. He claims if horsemeat of unknown origin has entered the food chain, other products that might contain exotic disease challenges could also be entering the UK.

The origins of the 2000 classical swine fever outbreak, followed by the 2001 foot-and-mouth disaster have never been fully established. The NPA feels that although the UK pig industry has an excellent audit trail from birth to slaughter, these standards do not necessarily apply to imported meat.

Retailer initiatives

Tesco’s recent initiative to create a sustainable pig group supply chain has met with much interest and producers are expected to start sending pigs in the next few weeks. The proposed base price of 170p/kg appears attractive when compared with current slaughter returns.

Recent announcements by Tesco that it intends to rely on greater volumes of home-produced meat rather than imports of all species will also help improve demand for UK pigmeat.

Other retailers including Waitrose, Marks & Spencer, the Co-op and Morrisons are also becoming more involved in vertically integrated supply chains and further initiatives of this type from other major retailers are forecast.

Sow stall ban

The European Commission has this week called on nine EU member states, including Denmark, Germany, Ireland and Poland to take action to achieve compliance with the European Union’s stall ban.

If these fail to respond within two months the EU Commission will require them to take the appropriate measures to comply with the stalls ban within two months.

But it is unclear what will happen if member states continue to flout the ban; in the egg industry the EU has postponed further action against countries who failed to scrap battery cages for hens.

The EU sow herd fell by 3.9% between June 2011 and June 2012. Some of this is attributed to high feed costs and the stalls ban, but Brussels’ predictions are that European Union pigmeat production is unlikely to slip by more than 3% in 2013.