Pig market outlook promising into 2017

Pig prices are forecast to remain firm well into next year as tight supplies and stronger export demand on the back of a weak pound underpin domestic markets.

After the lows of 2015 there has been a sustained improvement in prices since the spring. This has taken the GB average price for standard-specification pigs to 146p/kg, about 20p/kg above last year.

A slowdown in production caused by a drop in the UK breeding herd in 2015-16 has been a major factor in the upturn, according to a report by AHDB Pork, which predicts domestic supplies will tighten further into the latter part of 2017, when numbers are likely to recover.

The weak value of sterling is also improving the competitiveness of UK pork over other European supplies, which should favour exports and lead to lower imports for the rest of 2016 and much of 2017, the report said.

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Prices in many EU countries have been higher than in the UK for much of the summer and although the situation has reversed in recent weeks, the gap is closer than this time last year (see table below). However, there remains considerable uncertainty about the effect of Brexit discussions.

“At the moment, UK prices are still increasing and I would be surprised to see them fall this side of Christmas, as there are still reasonably good market prospects,” AHDB Pork market specialist manager Stephen Howarth said.

“We don’t know how much stronger or higher prices will go; a lot depends on what happens within the EU market.”

Seasonal fluctuations in supply and demand would still influence prices over the coming months, albeit at a higher level than 2015. Markets usually slowed down in the new year before rising again in the spring, he added.

While the higher prices were a welcome boost for producers, consultant Peter Crichton warned that feed prices had also increased and showed little sign of easing, especially if there were further falls in sterling.

Average spot feed wheat values had risen to £129/t ex-farm, but trades of £135/t had been recorded and futures markets remained bullish, he said.

January 2017 Liffe wheat futures had reached £141/t, while July 2017 was up to £144.65/t at the time of writing.