The rise in pig prices this month may have come too late for some producers, writes Deirdre O’Shea, IFA Pigs Executive.
Last month got off to a positive start with a 4c increase announced on the first Friday, much to the relief of farmers. It goes without saying this price lift was badly needed and prices still have a long way to go before farmers return to profitability.
Unfortunately, it was too late for some, as a number of producers have exited the business due to the prolonged period of negative margins.
Signs of positivity
Similar to the previous month, May got off to a good start with a 4c increase for farmers.
Signs of positivity are undoubtedly retuning to the market and it is hoped this trend will continue, preventing any further casualties on the producer side.
Similarly, across the EU market, signs of optimism are finally appearing with pig prices on the rise. The strong Chinese demand is the main driver of this lift.
EU & Asian markets
In addition, the domestic EU market is showing strong signs of recovery, with barbecue meat sales across the continent beginning to show positive progress. France, Spain and, to a lesser extent, Germany, have reported decreased slaughter weights which should also help resolve the oversupply issue that has been hampering the European market since the closure of Russia to EU pigmeat.
Despite China being to the fore of media attention, it is not the only Asian market importing increased amounts of pork during 2016. Japan also increased its intake in the first quarter by over 20% year-on-year. Japan imported 209,000t during the first three months, its highest volumes for this period in over two decades.
EU exporters have been the major beneficiaries, with exports up 40% year-on-year, bringing the EU market share to 37%. However, signs are that import demand may have peaked during Q1 and may ease off for the remaining months of 2016.
In saying that, imports are forecast to grow for the year as a whole, but not to the same extent as growth witnessed in Q1.
Chinese pork imports continued to boom during 2016, as import figures more than doubled compared with the same period in 2015.
The domestic pork price in China, at over 350c/kg, is driving the demand for more imports. Reports suggest that restriction to capital and increasing environmental legislations are hampering expansion among producers in China.
Imports from the EU are up 93% in Q1 versus the same period last year. Germany and Spain are achieving the greatest increases in exports, but all major EU producers have contributed to this growth.
Imports from non-EU countries have also increased significantly during the first quarter. The US in particular is exporting greater quantities, as a number of processing plants have been accredited by the Chinese authorities as part of their ractopamine-free adherence schemes.
Rabobank Report outlook
The most recent Rabobank report is significantly more optimistic for the global pork market compared with previous reports.
The report states that: “Stalling supply and strong import demand in China will support the recovery of the global pork market above the expected seasonal improvement in Q2 2016. It will result in higher-than-expected recovery of the Rabobank five-nation hog price index, which will support pressured prices across the globe and will be particularly welcome in the EU.
Based on continued buoyant export demand and a strong home market supported by the main Irish retailers and secondary processors, the second half of 2016 is predicted to return a profitable margin to producers – something that hasn’t been witnessed for some time now and will be very welcome by all in the industry.