2017 set to be 'a more positive year' for pig sector - Andersons

2017 looks set to be a ‘more positive year’ for the pig sector, with producer margins returning to the black, according to Andersons, the farm business consultants.

Writing in Andersons' 'Outlook 2017' document, Lily Hiscock wrote: “2017 looks set to be a more positive year for the (pig) sector offering greater price stability after almost two years of depressed prices and negative margins."

While the exchange rate will continue to support export growth into Europe, she said the UK was also ‘in an excellent position’ to further increase exports to China, predicting that Chinese domestic pork growth will slow down in 2017 (in contrast to the 2017 forecast of AHDB's Stephen Howarth).

She added: "Domestic prices are expected to be maintained at a higher level in 2017 than seen throughout early 2016, with increased exports contributing to a tightening of supply in the UK."

Return to positive margins

She predicted that 2017 'should see a return to positive margins for UK pig producers'. However, she urged farmers to be aware of changes in feed prices and to consider booking feed forward, if it will guarantee a positive trading margin.

"Currency changes have already provided an uplift in UK cereal prices and protein prices look very volatile due to uncertainty over quality of supply and weather in South America," Ms Hiscock said.

"It is anticipated that cereal prices will settle, due to the high level of stocks across Europe; however, protein prices should be watched more carefully."

She added that further supermarket pledges to source British pigmeat, following that made by the Co-op in 2016, could have a positive impact on the sector.

Productivity gap

But she urged producers to maintained their focus on improved productivity through feed efficiency, management of costs and locking into margins through forward buying.

The UK pig sector still lags behind in productivity compared with other EU member states.

"The current average for pigs finished per sow is 26.2, compared, for example, to Denmark, which is 30.10," she said.

"The key reason for the difference is due to the UK producing below average pigs born alive per litter (currently approximately 12.1 against EU average 13.2). This also affects the cost of production, with the UK average in 2015 being £1.27 per kg deadweight. This is approximately £0.19 more than producers in Denmark.

"Planned UK investments in genetics, training and research should assist in improving UK productivity and therefore competitiveness on a global scale. It should be noted however, when comparing productivity, that the UK has a larger than average outdoor pig herd, which generally has lower productivity than indoor herds."