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What impact will rising supplies have on the market?

7th Sep 2017 / By Alistair Driver

Prices are going to come under pressure over the next few months as pig supplies tighten in the UK and the EU, according to AHDB Pork strategy director Mick Sloyan.

Mick SloyanBut, with the weak pound continuing to support the UK price, we are unlikely to see a dramatic fall off from the current strong market position.

The latest figures from AHDB Pork showed the EU-spec SPP declined for the second consecutive time last week, falling 0.43p. But at 163.74p/kg the quote remains 25.5p above year earlier levels.

Despite the bank holiday, estimated slaughterings increased by 7% on the week to 173,300 head, 5% up on a year ago, although the surge might have been partly down to breakdowns and short working weeks at some plants the previous week.

Mr Sloyan told the NPA producer group in London on Tuesday that the recent slight downturn in price, following a sustained period of rising prices, was not unexpected.

He said the EU reference price had started to fall again in recent weeks. But with the differential between UK and average EU prices at around 7.5p/kg, slightly less than in recent weeks, imports are still not significantly more attractive in price terms. “There really isn’t a great deal of pressure from that European market,” he said.

But he added that, like the UK, the European market was starting to see more pigs coming through, following tight supplies so far this year. “There was always was going to be an increase and that is just starting to show,” Mr Sloyan said.

At the same time EU export volumes to China and prices, which were exceptional last year, are down. China remains a strong market for the UK, worth, including Hong Kong, more than £100 million last year for fresh frozen and processed pork and offal.

“So that is all leading to a bit of a softening of the market,” Mr Sloyan added. “We are bound to see prices put under pressure as we go through the autumn. If they stabilise before Christmas that would be a good thing. I don’t I think it will be anything dramatic, depending on the exchange rate.”

He said there were no indications to suggest the exchange would shift significantly over the next few months, ‘particularly on the upside’ with all the uncertainty surrounding Brexit.

But while this is certainly having a positive on UK price, the other side of the equation is that it is also contributing to higher costs of production.