Tough market conditions persist in the pork sector, but there are reasons to remain hopeful, according to new analysis from Quality Meat Scotland (QMS).
Although the pace of price declines for hog producers has eased since peaking in the fall, industry data continues to highlight serious challenges for producers and processors.
However, the acquisition of Quality Pork Processers Ltd in Brechin by Browns Food Group could help alleviate some of the current challenges facing the sector.
Iain Macdonald, senior economic analyst at QMS, notes that downward pressure in the pork market continues.
“The standard price for GB pork (SPP) fell below 138p/kg in the last week of January, leaving it 1.9% below the same week of 2021 while at just under 142p /kg, the price of carcasses weighing 70-104.9kg was down 0.5%.
“Reflecting that market conditions had also been challenging at the start of 2021, the SPP trailed its five-year average by almost 7%.”
The downward pressure in the pork market came from the inability of the processing sector to increase production to handle an increased supply of finished hogs.
“This production constraint has been driven by a lack of skilled workers, with changes to UK immigration rules after leaving the EU making it more difficult to recruit overseas.
“In the meantime, domestic workers tend to favor careers in other sectors, such as online retail warehousing,” Macdonald said.
In June 2021, England’s Agricultural Census reported a 6% year-on-year increase in fattening pigs, with a 2% increase reported in Scotland.
“Yet, at UK level, slaughter fell slightly from a year earlier between June and the end of the year. This has resulted in a backlog of ready-to-slaughter hogs on farms, with low competition for these hogs leading to lower market clearing prices.
“Furthermore, the delayed slaughter meant that fast-growing pigs quickly exceeded target weight ranges, further reducing their value to the producer and processor, as heavy carcasses and their components have fewer markets.”
Newly released December Census results for England showed a much smaller seasonal drop in fattening pigs between June and December than usual, falling 3.5% from a five-year average of 8% .
Mr Macdonald said: “Compared to a more normal seasonal scenario, this suggests that the number of slaughters could have been 177,000 below potential between June and December.
“The result in England was that the year-on-year increase in slaughter pigs on farms widened to 11% in December.”
In Scotland, results from the December census have not yet been released, but as the number of fattening pigs on Scottish farms was 8% of the English total in June 2021, this could suggest that around 14,000 pigs from less is slaughtered on Scottish farms than the potential over the same period. , bringing GB’s backlog to 191,000.
“In 2022, standard pig slaughter in UK abattoirs reporting prices started the year below its 2021 weekly average, suggesting little progress has been made on the backlog,” said Ms. Macdonald.
Further evidence of market distress and a large backlog comes from an increase in carcass weight since the start of the year, approaching 96 kg.
“In the four weeks to January 29, around 18.2% of standard carcasses weighed at least 105kg, compared to 5.6% a year earlier, and this figure was already at a high level at the start of 2021 due to of a backlog caused by covid-19. slaughterhouse closures at the end of 2020.
“A slight positive for producers is that the increase in carcass weight compensated for the drop in prices per kilo, which resulted in higher average prices per carcass.
“During the last week of January, the price per carcass was 5% higher than last year and 4% higher than its five-year average.
“Nevertheless, that’s before factoring in the cost of production. By late summer and early fall, grain and soybean futures had fallen from early 2021 highs. “said Mr. Macdonald.
“And Defra’s compound feed report for the July-September period had suggested that, although still 13% higher than a year earlier, the cost of pig feed was down slightly in the quarter. .”
Since then, a deterioration in the expected global balance of grain supply and demand has pushed up wheat and barley prices by around 15% and 25% respectively.
Meanwhile, a dry summer in Argentina and Brazil has led to a tighter global soybean supply, pushing the price of soybean meal up about 15% since the fall.
As a result, these higher commodity prices will have trickled down to compound feed prices over the winter, likely pushing them above the levels last reported by Defra from Q3 2021.
More positively for the pig sector in Scotland, a potential recovery in pig slaughter towards the levels seen in 2020 following a change in ownership of the Brechin slaughterhouse.
“This change in ownership also comes with wider benefits to the Scottish economy as pig carcasses will be processed into pork cuts and other pork products at processing sites in Scotland.
“As a result, economic value will be added and employment supported in Scotland rather than at production sites south of the border,” Mr Macdonald concluded.