Looking forward to 2017 - reasonable outlook for first six months

AHDB Pork's market specialist manager, Stephen Howarth, outlines the market prospects for the year ahead, after the much-needed recovery during 2016.

For much of 2016, the position of pig producers has been improving, with prices rising steadily since the spring.

This is due to a combination of factors, including reduced domestic supplies, the weaker pound (particularly since the Brexit vote), stronger EU market and buoyant export demand. The main downside has been the ongoing struggle to generate pork demand on the home market.

At least some of these factors look set to remain in place into 2017, which suggests a reasonable outlook for the first half of the year, at least, once we get through the New Year lull.

On the domestic front, we are forecasting that pigs will remain in relatively short supply during the first half of the year before picking up later. This is the legacy of the very low prices in late 2015 and early 2016.

Although the pound has recovered a little of late, most forecasters think it is likely to weaken further once the Brexit negotiations get going, possibly even reaching parity with the euro by the end of 2017.

The EU market is also likely to remain firm as it too sees a tightening of supplies. Export demand is a little less certain but the exchange rate will certainly help. The Chinese import boom seems to be cooling and there is more competition from the US, Canada and Brazil, where prices are currently low.

Second half of 2017

Into the second half of 2017, price prospects look a little less positive, especially if domestic demand remains a challenge. Productivity gains are likely to mean pig numbers return to growth, both in the UK and on the continent, and China too may be producing more pigs again.

This could put prices under a bit of pressure, although this could be mitigated if the pound does weaken further. Of course, currency will also have an impact on input costs, which could also affect the financial equation for producers.

One other change for 2017 is that I will be off to pastures new, as I leave AHDB at the end of 2016 for a new role with the Agricultural Engineers Association. I’ve very much enjoyed my time in the pig industry and have met some great people, with real commitment and passion.

I certainly plan to keep in touch and wish everyone well for the future. We have a good team in place to carry on our work analysing the market and any enquiries should be directed to my colleague Mark Kozloswki.