Although prices are beginning to show signs of improvement there is still caution amongst the industry. Since its peak in July of 152.9p per kg, the DAPP fell by 8.4p in three months. It has since risen marginally due to better spot demand. Whilst the supply of clean pigs is above the levels seen a year ago, as Christmas approaches, demand from processors is increasing. With increased feed costs, weights of finished pigs have reduced slightly, putting an end to the trend of increasing carcass weights. However, total UK pig meat production to the end of September last year still showed a seven per cent increase on that of the previous year to 600,000 tonnes.

Weaner prices are obviously heavily influenced by the prevailing finished pig price, but they are also an indicator of the sector’s confidence in future returns. Weaner values fell during the autumn as the prospects for market improvements receded. The graph below shows weaner prices for September being 11 per cent lower than those in September 2010.

Feed prices have been the big issue in the sector for the last 15 months. Although cereals prices have weakened from recent market highs, this may not quickly translate into lower costs of production. Many feed companies will have made forward purchases of grain at previous, higher, levels, and the prices of non-cereals products used in rations have generally not fallen greatly. Feed prices may, therefore, prove to be ‘sticky’.

Despite the tough market conditions the June 2011 census showed a further increase in the size of the UK pig breeding herd – albeit by a little under one per cent. It will be interesting to see whether the December survey shows numbers continuing to hold up, given the ever-longer period of lacklustre prices and high costs producers have faced.

UK average weaner prices – 2008 to 2011

Evidence suggests producers may be concentrating on replacing unproductive sows rather than reducing their herd. Sow productivity continued to increase during 2011 due to improved health and genetics. The cost pressures facing the industry were also a driver for more efficient production.

Looking ahead, there are some positives for the industry. There could be a boost from export market, due to the partial stalls ban coming into effect in 2013. Many producers in the EU are struggling to comply with this in the face of low profitability and restricted bank lending. It is believed that many will reduce production or exit altogether, and this process may begin well before 2013. Forecasts for EU pig slaughterings for next spring/early summer show falls of 1.3 per cent in the second quarter of 2012, due to the predicted drop in sow numbers. This could mean a reduction of 2.1 million tonnes of pig meat on the EU market.

China has agreed to open its market to UK exports, which could be worth as much as £40 million a year. With pork being a key meat for many Chinese, and home-produced levels dropping, this market could prove very important if the strict inspection criteria are met. BPEX has increased its promotion on the lead up to the 2012 Olympic Games, using them as a ‘worldwide shop window’ for pork products. Domestically, demand should be reasonably strong in 2012 as consumers turn from more expensive meats such as beef and lamb to pork.

The next few months will be a critical time for a number of producers in the industry facing significant financial strains. However, there are some grounds for optimism longer term for the best and most-efficient pig producers.

February 2012