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UK market still 'dire', but medium-term prospects brighter

25th Jul 2019 / By Alistair Driver

The UK pig market continues to be ‘dire’, although there is hope things will pick up in the second half of the year as Chinese demand is predicted to increase.

The SPP rose by just 0.3p/kg last week to reach 152.5p/kg, the smallest weekly increase since April, following an increase of just 0.5p/kg the previous week. 

pig price july

AHDB said it was unsurprising prices are flattening off. The spot market, which influences the SPP, has been falling since the end of June, according to Traffic Lights. Prices in Northern Europe have also come under pressure lately, while domestic retail demand is 'reportedly still subdued'.

"So, while demand from China remains strong, conditions on other markets are not too favourable," AHDB said.

Meanwhile, supplies have increased, with throughput up on the week to a year-high of 179,100 head, after disruption to the slaughter pace the week before. This 5% up on last year. Carcases are, on average, over 1kg heavier than last year.

Although prices have now been rising steadily for the past few months, the expected surge, seen across the EU and in North America during the early part of the year, has not materialised.

This has not gone unnoticed among producers. One recent forum poster observed: “The job has gone in to decline again. What the hell is happening?”

According the AHDB website, EU pork was, on average, still significantly more expensive than domestic product in mid-July – the EU reference price of 159p/kg was more than 6p ahead of the UK price. This situation (and you have to add a few pence to the EU price to get the real picture) usually drags the UK price up to at least parity, something that has still not happened.

NPA chief executive Zoe Davies has been speaking to processors over the past few weeks to try and find out was is going on.

There is plenty of evidence that demand from China has weakened in recent weeks. “All countries were sending a lot more pigmeat to China in March, which China filled its cold stores with,” Zoe said.

“Coupled with that we are now hearing that many producers in China have liquidated their herds early to get out ahead of ASF, which dumped a load more pigmeat onto the market. China apparently had more pork in storage than anyone realised so demand slackened off in quarter two, although it is still good for offals." 

According to the latest Genesus global report, US prices came back rapidly, after surging over the spring, although they have started to rise again in recent weeks. The failure of Chinese demand to live up expectations - so far - has also dragged back EU prices. 

“It is believed EU processors got a lot less for the pork than they were expecting, having paid high prices for it, and Germany lost their export market to the Philippines, so they are now back-peddling.”   

Processors in the UK are still trying to get approval from the Food Standards Agency, for trotters for some plants, which would represent lucrative sales, she added. 

However, things could turn again in later in the year. “We are expecting the Chinese cold stores to empty out by the autumn - some analysts predict by the end of August, others believe it will be nearer the end of September - which is likely to create another surge in demand,” Zoe added.

Looking to the immediate UK outlook, she added: “The UK market is still dire and this weather isn’t helping. Despite the headline figures, EU loins are still cheaper than UK loins, despite the 20% increase in price, because the Europeans price their carcasses differently so there is no interest among retailers to switch and supply more British.

“We still expect to see a moderate increase in price over the next few weeks, but we should see more movement when the Chinese market picks up again later in the year. There are no sows behind the ones that have been culled out to produce the next generation of pigs for the Chinese market so there will be demand for pork and prices will increase.”