UK pig price still on the up but falling EU prices could put the brake on
8th Nov 2016 / By Alistair Driver
The UK pig price is continuing to rise but falling EU prices could soon put a brake on the upward trend.
The EU-spec Standard Pig Price (SPP) for the UK has now been rising for 30 consecutive weeks since early April, reaching 147.11p/kg in the week ended October 29. This followed another weekly increase of 1.2p.
The SPP is 20p higher than the same point last year and is comparable to levels last seen in early November 2014.
The record period of week-on-week price rises has been driven by a combination of strong demand from China, tight UK production and the weakening of the pound following the Brexit vote, which has made UK pigmeat more competitive at home and abroad.
However, one additional trend that has been pulling up the UK price is now reversing. Since the summer, the UK has lagged behind the average EU price but these are now falling, which is likely to have an impact over here, according to AHDB Pork director Mick Sloyan.
The latest EU Reference price for the week ending October 31 was down to 136.37p/kg, the third consecutive reduction from the early October high of nearly 145p/kg.
Taking the headline figures, this puts the EU price 8p below the UK equivalent. However, a more realistic comparison, given the differences in the way prices are calculated, would put the gap at 2p, although it is likely to grow in the coming weeks.
Mr Sloyan told the recent NPA producer group meeting: “We have been playing a bit of catch up with the rest of Europe. European prices hit a peak in the summer on the back of strong demand and good exports to the Far East and China, while pigs were a bit short.
“But autumn demand was not so good, export markets have gone a little weaker and there have been more pigs coming onto the market, which is a seasonal thing.
“We were chasing their price but, in recent weeks, while we have carried on rising, theirs has come back down again.
“What does it mean for our market? The immediate outlook is still pretty good, certainly in the run up to Christmas. A lot of people have actually priced imports on a monthly or three-monthly basis and we are still very competitive.
“So I think there is still a bit of headroom for prices to go up, but it will hit a point where the lower European price is going to start having some impact on the market.”
Reference Price clarity
Mr Sloyan acknowledged that the picture is clouded by differences in the way prices quoted under the European Commission’s weekly EU Reference Price tables are calculated.
AHDB Pork recently acknowledged the Reference Price overstates the UK price by approximately 5-6p/kg due to a combination of deductions from UK prices, bonuses received in other countries and the impact of outdoor production in the UK.
NPA chairman Richard Lister called for AHDB Pork to remind retail and processor customers the headline EU Reference Price was ‘not like-for-like’.
Mr Sloyan acknowledged AHDB Pork needed to be ‘a lot clearer about how it is calculated’ and said the levy board was considering putting a ‘health warning' on the Reference Price comparison on its website.
It is being reported that Danish Crown is looking to raise the price paid to its pig producers by DKK 0.60/kg (£0.07/kg) to increase future earnings for the sake of the company’s owners.
In future, Danish Crown’s settlement price will be benchmarked against a basket of pig prices from the other four large pig producing and pig exporting countries in Europe - Germany, Spain, France and the Netherlands. Previously it only compared prices to Germany but said this was sometimes a poor yardstick.