FOLLOWING a steady period of downward pressure in the first few months of 2017, farm gate pig prices have now rallied to hit a nine-week high in the third week of March – representing an increase of 35% compared to the same period last week. 

Having slipped from 151.9p per deadweight kg at the end of 2016 to 149.6p in the week ending February 25, the GB Standard Pig Price (SPP) now sits at 151p in the third week of March. 

“While this impressive year-on-year increase will be of comfort to producers, it should be noted that the market remains below the levels of March, 2014, while feed prices have also risen sharply over the past year,” said Iain Macdonald, senior economics analyst at Quality Meat Scotland. 

Feed wheat is trading some 40% to 50% dearer than last spring, thanks to the combination of strong home and global demand for wheat, lower EU production in 2016 and currency movements. The price of soya meal has also increased, by more than a fifth, mainly down to a weaker sterling against the US dollar. 

“A key barometer of the prevailing market conditions is the spot price available to producers for pigs outwith regular contractual deliveries. Whenever spot prices fall below contract levels it points to a well-supplied market. However, at times when processors are having to seek supplies from outside their regular scheduled deliveries, the spot market will firm,” added Mr Macdonald.

Industry sources suggest, he said, that spot prices were falling until early February, but by the beginning of March had risen above contract levels, indicating tight supply relative to demand. Therefore, Mr Macdonald observed, the recent lift in the SPP has come of little surprise. 

A closer look at the weekly deadweight price reports reveals some of the key drivers in the recent upturn. Taking slaughterings first, the price reporting sample of prime pigs has been falling seasonally. The three-week rolling average number of pigs in the SPP was 5% lower in the third week of March than it had been at the end of January, said Mr Macdonald.

“Furthermore, carcase weights have been following a seasonal downturn over the same period, with the three-week average slipping from 84.4kg to 84.1kg – adding to the fall in pigmeat supply. Lower carcase weights mean that, at £126.75, the average price per carcase remained 0.5% below its year-opening level, whereas the price per kg was down by only 0.1%,” added Mr Macdonald.

On the demand side, there is limited evidence of any significant upturn. 
Household purchase data supplied by Kantar Worldpanel for the past few years indicated that pork sales tend to be lower in February and March than they were in January. Unlike lamb, pork does not show a spike in volumes around Easter. 

On the continent, similar price trends have been observed in the first quarter of 2017 with a sluggish start to the year followed by a March upswing. 

Industry reports, he said, suggest that the supply and demand balance is favouring producers, and is likely to continue to in the coming weeks. The strongest increases in late February/early March have been in France, Spain and Holland, pushing prices 6% to 9% ahead of their 2016-ending levels. More muted increases of 3% to 4% have occurred in Germany and Poland. However, producer prices in Denmark and Italy are yet to fully recover after falling in January.