Weak euro puts pressure on UK prices
At the end of last week, the pound reached its strongest level against the euro for nearly eight years, with implications for UK pig prices.
One euro is now worth less than 70p, around 8p less than at the start of this year and almost 18p below the latest high in the summer of 2013. The recent uncertainty over Greek debt and its implications for the long-term stability of the euro have created pressure on the currency’s value. In addition, expectations that UK interest rates will start to rise in the next 12 months have added to sterling’s strength. With few expecting much to change in the coming months, it seems likely that the euro will remain weak.
Over the last decade, there has been a fairly close relationship between the exchange rate and the GB pig price, particularly once it has been adjusted to take out the effect of inflation. There is little doubt that the weakness of the euro has contributed to the fall in pig prices over the last year. If this doesn’t change, pig prices will struggle to recover to the levels seen in recent years. The euro was regularly below 70p between 2004 and 2007; during this period, the pig price was consistently below 140p/kg, even when converted to today’s prices.
Cull sow prices are even more directly affected by the exchange rate, given most sow carcases are exported to the Eurozone. Again, this means there is little prospect of a recovery in prices, which have recently been at their lowest level since 2007 – the last time the exchange rate was at similar levels.