1998 a pig of a year

By Peter Crichton

ALTHOUGH the next Chinese year of the pig does not occur until well into the next decade, everyone in the industry will have cause to remember 1998.

In real terms, prices have ended the year at their lowest levels since the great depression of the 1930s.

The first signs of the problems ahead were the January AAPP opening at 90p, compared with 111p a year earlier.

Although the index staged a modest rally during March and April to peak at almost 100p, the slide started in the late spring and continued until it bottomed out at 60p in early October. Many producers claim that the Malton decision on 28 May to stop using the AAPP as a price base and move to a fixed figure was the start of the downward spiral, and lead to other abattoirs also scrapping or adjusting their buying contracts. The loss of the Government levy to renderers saw the added costs hit producers as these were chopped off their bottom lines.

For the whole of the year, the AAPP has been at lower equivalent levels than the same period 12 months earlier at up to a 45p discount.

The tail end of this year will see this reference price settle at about 66p and will be of little comfort to producers who need about 95p to break even.

The situation seems to be the same, if not worse, in other parts of the EU and the USA, with Dutch prices stuck at 48p. This is a massive 68% fall on a year earlier. The Danes, who continue to supply the UK market, are trading at about 62p, with Germany and France in the low-to-mid-60s.

American hog producers are reported to be losing up to $75 (£44.60) on each pig sold, which is the lowest price since 1941, according to the US National Pork Producers Council.

Reasons for the crisis throughout the pig producing world are varied, but analysts have distinguished the main factors that can be attributed to this latest downturn.

The lift in EU prices in 1997 following swine fever outbreaks in the low countries encouraged greater expansion of the EU herd, which has contributed towards the overproduction we now see in the EU.

The financial crisis in the far east and the collapse in the value of their currencies lead to a swing away from meat consumption and the loss of many Pacific Basin countries as export markets.

Turmoil in Russia and the loss of exporters confidence dealt a huge blow to the EU pigmeat market as a whole. Russia is the largest external customer of the EU, taking up about 30% of total output.

And the increased slaughter numbers – along with the extra weight on an already oversupplied market – has weakened prices still further.