Positive price moves by processors in May and June are a step in the right direction, writes IFA Pigs Executive, Deirdre O’Shea.
The upward pig price trend continued in May, with all processors increasing 4c/kg on the first Friday of the month. More good news came throughout the month when a second 4c/kg was added to producer prices. It was the two southern factories, Dawn and Stauntons, who were first out of the traps with the good news.
The remaining factories held out until the following week to increase to the same level, much to the frustration of suppliers. These delaying tactics are very costly to producers, particularly during a time when farmers are trying to recover the losses of the previous 18 months of historic low margins. Every 4c/kg withheld is costing the average producer about €1,000 per week.
June again started on a positive note, with all processors increasing 4c/kg after the bank holiday weekend. This increase brings prices up to a top price of €1.52/kg (including VAT), showing prices moving in the right direction. However, the cost of production remains at €1.58/kg, according to Teagasc, so farmers do need prices to continue to move upwards before any real profit can be realised. There are a number of indicators to suggest prices will continue to push ahead over the coming weeks and months, most notably the strong export trade, driven mainly by China, a continued strong domestic trade, and the European Football Championships.
Already Tesco has reported its anticipated increase in sales as a result of the Euros, with estimates that burgers sales would be up by 50% and BBQ meats, sausages and chicken would be up 25%. This sporting event should prove as a big boost right across Europe during the next month of the competition.
Upward trend in prices continues
There are over 83,000 more fattening pigs slaughtered in the Republic of Ireland to date compared with 2015, representing a 6.5% increase in slaughter numbers year on year. Although slaughter numbers have increased for the year to date, recent weeks indicate that pig supplies are beginning to tighten. Slaughter numbers for sows and boars are back slightly year-onyear, with over 2,500 less slaughtered to date (up to week ending 04/06/2016). The most notable change in pig numbers are those pigs sent across the border to Northern factories.
Numbers have decreased quite considerably since the beginning of the year, with almost 30,000 fewer pigs exported to NI factories for slaughter(up to week ending 28/05/2016).
Slaughterings across the EU are also decreasing as the year progresses. The first and second quarter showed slight increases in slaughtering numbers year on year (+1.7% and +1.4% respectively), while predications for the third and fourth quarters show a steady decline in numbers available for slaughter (+0.3% and -2.4% respectively).
These figures don’t come as any great shock as the number of sows served in EU is back 2.1%, according to the Eurostat December 2015 livestock survey. This survey also shows that the number of gilts served is back 6.2% year on year. However, continued increased efficiencies will counteract some of these decreases. Overall, it is predicted that slaughter numbers across the EU will increase by 0.2% for the 12 months. This is back almost 2.5% on 2015 numbers.
The most recent pig census in Poland (March 2016) has revealed that the sow herd has halved over the past decade to 800,000 sows. Despite the dip in sow numbers, the processors are running at the same capacity. The gap is being filled by increased imports of weaners and slaughter pigs from Denmark.
China continues to play a key role in driving both European prices and leading to a recovery in domestic prices. Bord Bia estimates that Irish exports to China will reach 65,000t in 2016, up from a record 47,800t in 2015. Pork prices in China are continuing to climb, with current prices up 40% compared with 12 months ago.
Pork is a staple form of protein in China, at the heart of the Chinese cuisine. Total pork consumption in China is estimated to reach almost 54m tonnes, with the nation accounting for about 50% of global pork consumption.
Although all indications point towards a positive second half of the year for pig farmers, it is undoubtedly well overdue. The pork sector has been affected by a serious and long-lasting crisis. In spite of recent, slight improvement of the situation in the sector, the situation on farm still remains fragile and there are still challenges to be mastered.