Prime pig prices are some 20% higher than this time last year with the potential to rise further on the back of increased demand as African Swine Fever continues to devastate pig herds in China and a growing number of cases are reported in Vietnam, the Philippines and South Korea.

Latest trade data from HMRC shows UK fresh/frozen pork exports throughout 2019 rose to 244,000tonnes, up by 12% on the year, while imports were down 2%.

Exports for December alone increased 9% or 1500tonnes to 17,600 compared to the same month in 2018, with shipments to China doubling in size year on year to total 7,400 tonnes. This was, however, down from the highs of the previous month. Shipments to the EU overall were down on the year, although there were mixed movements for individual markets.

Exports to the Netherlands also grew on the year by 58%, potentially as some UK products are exported on from there to other destinations.

"The Chinese market is holding firm and is likely to remain strong for the next few years when there is a massive protein deficit in the country," Iain Macdonald, senior economics analyst with QMS, told The Scottish Farmer, adding that it could be three or four years before herds are restocked.

GB finished pig prices for mid February, show the Standard Pig Price (SPP) stood at 162.8p/kg dwt, up slightly from 162.4p/kg at the turn of the year despite Defra slaughter statistics suggesting higher production in January.

“GB weekly average slaughter figures rose 4.4% from December and by 1.7% from a year earlier, with increased carcase weights further boosting supply,” said Mr Macdonald.

Disappointingly, domestic consumption remains weak. Kantar reported an 8.6% reduction in spending on pork by GB households compared to a year earlier in the 12 weeks to January 26.

“Higher retail prices mean that the quantity of pork sold fell further, however, sales of processed pork products have been more stable."

Since the UK is only 59% self-sufficient in pigmeat production, international trade introduces significant market forces to the equation. UK trade statistics reveal significant falls in imports and rise in exports during 2019 so the net balance of imports has fallen, tightening supplies on the UK market.

“Growth in exports came almost entirely from increased deliveries to China/Hong Kong which more than doubled from a year earlier during final quarter of 2019, giving this market a 45.6% share of exports in 2019, up from 24.9% in 2018,” said Mr Macdonald.

Driving this growth has been the African Swine Fever outbreak in China which first appeared in August 2018.

Official Chinese Government statistics indicated that by October 2019, the country’s pig population had contracted by around 40%. While industry sources suggest even larger declines, a 40% reduction in China lowers global pigmeat production by 20%.

“The wholesale pork price in China had nearly tripled from early 2019 to a peak of 52 yuan/kg (£5.75/kg) as November began,” said Mr Macdonald.

“However, an import-surge helped stabilise the market and global traders reported weaker demand in December. UK trade figures support this as although exports were more than double year earlier levels, they did fall back sharply from an annual peak in November.

“By the year-end, Chinese wholesale pork prices had eased to 43 yuan/kg (£4.75/kg) and GB and EU producer prices stopped rising,” he added.

In early 2020, the evidence points to a renewed supply crunch in China. In the run up to the lunar New Year celebrations on January 25, Chinese wholesale prices rose by around 10%, reaching 47 yuan/kg (£5.20/kg).

However, at this time attention turned from animal health to human health with the conformation of a coronavirus outbreak in China.

Measures introduced by the Chinese Government to control the outbreak contributed to demand from the foodservice sector plummeting while retail distribution was severely disrupted. Additionally, global traders reported market access challenges, due to shortages of staff at the ports and in customs.

However, once price reporting resumed on February 10, a further tightening was evident, with pork prices climbing to around 50 yuan/kg (£5.50/kg). While the Chinese population may be eating out less, they have been buying more through supermarkets and online retail.

“In short, the level of supply in the world’s largest pork market remains well below the quantity demanded by its people, keeping imports strong and pig prices across the world at record highs. Given the scale of production losses in China, it will take years to recover,” said Mr Macdonald.

“These recent developments in China show how quickly an animal health or human health issue can destabilise the global red meat market,” he added.

Increased reports of ASF elsewhere, are also likely to bolster GB prices, which last year, saw Vietnam import 174,000tonnes of pigmeat throughout 2019 following the cull of about 5.9m pigs so far, approximately 21% of the country’s pig herd.

The incidence of disease in the Philippines in July 2019, has also led to increased imports, which in first 11 months of 2019, saw 288,000 tonnes of pig meat imported, according to national statistics. To date, almost 192,000 Filipino pigs have been killed as a result of ASF and by the end of the year production is forecast to drop by 20% in 2020.

Looking at South Korea, where the first case of ASF was reported in September, 2019, production is expected to fall 4% on the year provided the disease remains under control.

The UK currently has a small share of the Philippine and South Korean pig meat markets, so may be able to benefit from demand growth in these regions. However, this would only be if prices offered could compete with China and the domestic market. The UK does not have market access to Vietnam for pig meat currently.

Mexican meeting proves positive

An inspection of the UK’s pork market by Mexican inspectors has been branded ‘positive’ by industry leaders – as ambitions to gain market access move a step closer.

The delegation of Mexican officials spent two weeks visiting abattoirs and processors to learn more about the country’s pork production controls.

They also met with pork processors Cranswick, Karro and Tulip as well as viewing several cold storage facilities across the country.

The inspections formed part of ongoing work by the Agriculture and Horticulture Development Board (AHDB) in partnership with the Department for the Environment, Food and Rural Affairs (Defra) as well as UKECP, APHA, DAERA and FSA to open the market for pork exports from the UK.

Mexico represents a major opportunity for the UK’s pork sector. It is the second largest importer of pork – accounting for 9% of total international trade.

In 2018, the country imported 1.2m tonnes of pig meat, three quarters of which was fresh/frozen primary pork. The remainder was mostly offal.

The US is by far the dominant supplier, providing around 85% of imports – with the majority of the remainder coming from Canada. A few EU suppliers play a small part, with 8,500 tonnes of pig meat imported from Spain in 2018.