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Photo of 2017- a difficult act to follow?

Bethan Wilkins

Analyst

AHDB Pork Market Intelligence

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2017- a difficult act to follow?

Home \ Prices & Stats \ News \ 2018 \ January \ 2017- a difficult act to follow?

Following a number of lacklustre years for pig prices, 2017 proved to be exceptional.

The SPP remained above 150p/kg for almost every week, and reached a record high of 164.75p/kg in July. As such, margins also reached record levels in Q3, despite feed prices rising above 2016. All in all, for pig producers, 2017 could prove hard to beat this year.

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Nonetheless, the rising pig prices in early 2017 were primarily driven by a Europe-wide reduction in supplies, as opposed to an increase in consumer demand. For the first half of the year, EU production stood 2% behind 2016 levels and UK production was also 2% lower year-on-year. Dwindling consumer demand proved to be a black spot on the market in the first seven months of 2017, with Kantar Worldpanel data indicating fresh/frozen pork volume sales were 3% behind year earlier levels (32 weeks ended 16 July).

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As such, when production began to pick up in the latter half of the year, prices started dropping. In the second half of 2017, production grew 1% year-on-year in the UK. The latest EU figures also indicate their production was 1% higher on the year during the July to October period.

The latest AHDB forecasts anticipate that UK production could continue rising in 2018, and it is also anticipated that EU production could recover somewhat this year. As such, a rise in demand may be required to support the price.

The initial signs from domestic demand are encouraging. Kantar Worldpanel data suggests sales volumes have actually been growing on year earlier levels since August, albeit from a low base. For the 24 weeks ended 31 December, pork sales volumes were 2% higher year on year, even though retail prices have also been rising. It will be interesting to see whether this trend continues into the new year, when consumers become more health conscious. The latest messaging of the AHDB pork marketing campaign hopes to capitalise on this.

On the export front, fresh/frozen pork shipments increased by a modest 1% in the year to November, despite supply limitations early in year. This was thanks to rising exports within Europe, alongside sustained shipments to China. UK pork exports to China actually recorded some modest growth on the year in 2017, even though overall Chinese pork imports fell by a quarter during the year.

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While in recent months UK pork exports have been impacted by the Chinese slowdown, prospects for 2018 could still be positive. Recent reports suggest Chinese import demand could grow again this year. A lack of domestic infrastructure makes it easier to import pork in some areas, rather than transport domestically produced product. This might support UK export prospects next year, especially if further growth can be achieved in smaller markets such as the Philippines.

Overall, there do seem to be some initial positive signs regarding demand for British pork. However, it is important to remember the UK pig industry functions as part of the EU market, with EU pig meat accounting for over half of UK consumption. How demand for continental pig meat develops, both within Europe and internationally, will therefore be key for market prospects here in the UK too. With European pig prices still declining at present, UK prices could be under pressure for a while yet. Time will tell how long this continues.

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Bethan Wilkins, Analyst

bethan.wilkins@ahdb.org.uk, 024 7647 8757