INCREASING feed wheat prices coupled with falling farm gate pig prices have been squeezing producer margins from both sides over the past few months, and they look set to be hit further.

At present, farm gate prices are some 9% lower than this time last year, at 148.05p per deadweight kg, for the week ending September 13, and Stuart Ashworth, QMS director of economic services believes the situation is likely to become more challenging on the run up to Christmas when pig prices traditionally dip, due to increased availability.

“Notwithstanding the dip in slaughtering caused by reduced supplies of CO2 during June, which caused some increase in availability during July as the backlog was cleared, the UK weekly pig kill in July was reported to be 6% higher than last year, more than offsetting the lower kill in June,” said Mr Ashworth.

Furthermore, he said that throughputs at pig price reporting abattoirs, remain ahead of last year’s levels through August but dipped slightly in early September.

“With pig carcase weights higher than last year, this modest increase in production will have constrained prices as will a more competitive export market, particularly in Europe, which led to reduced UK export volumes during July,” said Mr Ashworth.

Meanwhile, the UK retail demand for fresh pork products continues to struggle, with the latest information from Kantar Worldpanel research showing retail purchases of pork in the three months to mid-August to be 4% lower than a year ago although ready meals and processed product consumption has seen some modest increase.

However, Scottish producers are seeing more modest price falls than elsewhere in the world.

“The average European producer price, which had strengthened during July and early August, has declined and is now 12% lower than last year,” said Mr Ashworth. “The North American pig producers are seeing prices more than 20% lower than this time last year, as are the Brazilians.”

Looking at European pig prices, these are under pressure because of much higher production in the main pig producing nations of Europe – Spain and Denmark but also Poland and Romania – plus static export demand.

The Chinese market has become increasingly tough and both Europe and the UK have seen exports their dip, but alternative markets in Asia have taken more product.

According to Mr Ashworth, falling prices in the United States are associated with growth in production, but also the sensitivity of commodity prices to changing terms of trade.

“The developing trade war between China and the USA has seen China increase tariff rates and physical checks on American pig meat on two occasions over the summer,” he said.

“This caused a collapse in American pig meat exports to China, leaving a significant volume of pig meat on the domestic market which has undoubtedly contributed significantly to the decline in American producer prices over the summer. Meanwhile, US pork production in the third quarter of 2018 is expected to be 4% higher than last year.”

Brazilian producer prices are much lower than last year because the Russian market has been closed to them for technical concerns.

“As Brexit uncertainty continues, the examples of the US and Brazilian market show how quickly technical constraints on trade can disrupt supply patterns and impact on market prices,” added Mr Ashworth.

Meanwhile, as African swine creeps further west through Europe, the risk to the UK remains at 'medium' following confirmation of the virus in wild boar in Belgium.

The deadly pig virus was confirmed in four wild boar in the Belgian region of Luxembourg, just a few miles from the French border, last week.

Three were adult wild boar found dead and in a state of decomposition, while another was a young weakened animal that was shot dead. It is understood a further three cases in wild boar have now been confirmed.

The risk level of the virus entering the country was recently increased to medium on a temporary basis, following a surge of cases in central and eastern Europe, particularly Romania.

The outbreaks are already affecting the market. Singapore has issued a temporary ban of Belgian pigmeat and it is expected that China, currently struggling to contain its own outbreak, will follow.

Imports of pig meat from Belgium accounted for around 4% of the UK total (23,000 tonnes), mainly primary fresh/frozen pork, from January to July, according to HMRC data.

Most of this is primary fresh/frozen pork, around half of which is in the form of fresh pork cuts. Belgium is a significant supplier of loins to bacon manufacturers.