March 15, 2005
UK and EU pig market report for 2005
No seasonal upturn in UK pork prices was observed in the final quarter of 2004. The average price in 2004, 104p/kg dw, was the same as the previous year. The market remained flat in January. However, prices moved up by about 2p during the course of February in response to slightly lower UK weekly throughputs and firmer prices on the Continent. Prices are currently very similar to than a year ago.
Cull sow prices fluctuated sharply in 2004 but, in the year as a whole, averaged 64p/kg dw in 2004. This was 20 percent more than in 2003 and the highest for seven years. Prices dipped by a few pence in January before recovering again in February, as demand for manufacturing pig meat remains strong in Germany and Poland.
The value of gross output of the pig sector increased two percent to 81 million in 2004.
Incomes on pig farms are estimated to have fallen by 15 percent in the year ended February 2005, reflecting a slightly lower pig meat price over the twelve months and higher costs. Higher feed costs will have been the major cause of lower net incomes, but fuel costs have also increased.
EU Producer Prices
Domestic demand across most of Europe was sluggish in January. The average EU pig reference pig fell by more than seven percent during the course of the month, with the weak German market reported to have been the cause of price falls in other markets.
There was a recovery in prices in February. The average reference price in the week ended 20 February was seven percent higher than four weeks earlier. There were significant price increases reported by some of the major producers. Prices increased by 11 percent in Germany, nine percent in Spain and 13 percent in the Netherlands. Prices were unchanged in the Denmark, although Danish slaughterings were high in January and February due to the carry-over of pigs from December 2004 when strike action disrupted throughputs.
There were a number of reasons for the recovery in prices: lower throughput in some countries, e.g. Germany and the Netherlands; strong demand in Eastern Europe and Russia; orders have started coming in for Danish pig meat for delivery to Japan after April 1 when the safeguard clause is lifted; stocks in many EU cold stores are reported to be at a low level and will need replenishing.
Feed ingredient prices remain significantly lower than a year ago due to a combination of factors, including better harvests and exchange rate movements. In February, feed wheat prices averaged 34 percent lower than a year earlier and feed barley 26 percent lower. Protein prices moved up slightly in February but, again, remain significantly lower than a year ago.
The lower prices are likely to be reflected in producers' forward feed contracts - the majority of which are taken out in the January-April period. Pig producers' feed costs should therefore be lower in 2005 than in 2004.
Pork imports have trended sharply higher since the late 1990s as a consequence of the downturn in production combined with increases in domestic consumption. However, there was little further change in 2004, with imports increasing by just 1,000 tonnes to 419,000 tonnes.
Imports continued to increase in the first eight months of the year but they showed declines from September onwards. This is likely to have been associated with a decline in the UK price premium over average EU prices. During the first half of 2004, the UK price was 17p higher than the EU average while in the second half of the year it was just 1 p higher.
Pork exports showed an encouraging increase in 2004, up 17,000 tonnes to 91,000 tonnes, thus largely reversing the declines of 2003. The growth took place in the second half of the year. Sow meat production, most of which is exported, declined from 39,000 tonnes in 2003 to 37,000 tonnes in 2004; this indicates that the main growth in export sales last year is likely to have been meat from slaughter pigs.