Why aren’t UK pig prices moving up yet?
In recent weeks, EU pig prices have shot up. This reflects a significant uplift in demand on the Chinese market, as African Swine Fever (ASF) starts to take a toll on supply levels. The EU average pig reference price reached 136.12p/kg in the week ended 7 April, and so now stands just 2p below the UK reference price. This means that when delivered to UK customers, standard UK pork will now be cheaper than the EU equivalent.
This situation reflects some unusual features in the UK market right now. Reports indicate large volumes of pork were stockpiled in preparation for a potential no-deal Brexit on 29 March. The industry will need to work through these stocks until demand can rise.
In addition, earlier factory breakdowns resulted in a high kill rate over the past two weeks. This temporary boost to supply has probably also depressed the market somewhat. If more pigs go out of spec due to delays in marketing, this can also lower the average pig price.
In contrast, reports indicate that EU pig supplies have tightened lately, reflecting the decline in the breeding herd last year. This would help support prices at a time when demand is rising.
The EU supplies around 60% of pig meat consumption in the UK. British produce typically attracts a premium due to higher demand in certain sectors. The UK should also be able to capitalise on the increasing demand from China. Already this year pork and offal shipments to that country have increased by over 40% (Jan-Feb). Therefore, with EU prices moving ahead of British prices, if they stay there, it is inevitable that the UK pig price will ultimately also have to rise. Although, with disruption to throughput over the Easter period, we can’t be sure exactly when this will happen.
Bethan Wilkins, Analyst
email@example.com, 024 7647 8757