The pig meat market remains difficult in Europe
By Bethan Wilkins, Agriculture and Horticulture Development Board (UK)
14 May 2020
Despite some easing of lockdown measures within Europe over the past few weeks, the market for slaughter pigs has still become increasingly challenging. In the latest week ended 26 April, the EU average reference price dropped by 2.57 to 178.66/100kg, the lowest price since last August. Reports indicate demand is difficult both on the domestic and export markets, even though pig supplies are not particularly large.
Germany is the largest EU producer, trader and consumer of pig meat. It is the primary destination for British cull sows and supplies approximately 12% of UK pig meat consumption. It is a net exporter of pig meat.
· Market reports indicate that slaughterhouses are now cutting throughputs. In week ended 3 May, weekly slaughter estimates were 6% below last year, according to AMI (note this week is affected by a bank holiday in both years). It seems a backlog of pigs is building.
· National VEZG pig prices are dropping. In week ended 29 March, the price was 1.89/kg, whereas for week ended 17 May it is quoted as 1.60/kg (-15%). A drop of 0.10 occurred in the latest week alone.
· The VEZG sow price also fell to 1.20/kg in the week ended 10 May, having been 1.53/kg in the week ended 19 April (-22%). This significant fall will also directly affect sow prices here. Reports indicate that sow throughputs in Britain have already been cut due to a lack of German demand.
Measures to limit the spread of coronavirus have eased in Germany recently. Schools are gradually re-opening, and some states have also indicated plans to reopen restaurants in the coming weeks. This may provide some limited support to national demand.
Denmark supplies approximately 14% of UK pig meat consumption, but also receives 5% of our exports. Denmark is a net pig meat exporter.
· The latest market reports suggest the situation here is better than in Germany. Although the European market is falling, export demand to Britain and China is reportedly stable, and even increasing in some other Asian markets. Pig prices in Britain are still just on an upward trend, which may offer some support to suppliers in Denmark.
· Nonetheless, national prices are still dropping. The Danish Crown price quoted for week ended 17 May is 1.74/kg, compared with 2.00/kg in week ended 29 March (-13%). A drop of 0.08 occurred in the latest week. The interconnectedness of the EU pig market means Danish prices will be affected by disruption elsewhere, even if it is less directly affected.
Denmark first started to ease lockdown measures in mid-April. Primary schools returned on 14 April, and older children are set to return next week. Cafes and restaurants also opened this week (11 May), with social distancing guidelines.
Ireland supplies approximately 7% of UK pig meat consumption, particularly processed product. It is a net pig meat exporter, and receives around 16% of our exports (although some may be for further processing and not the end market).
· Pig slaughter in Ireland is highly concentrated, with just two sites responsible for more than half of the slaughter. While processing has been able to continue so far, an outbreak in either of these plants would generate significant supply chain problems.
· Other meat plants have been affected by significant COVID-19 outbreaks, including the Rosderra Meats plant in Roscrea where production had to be curtailed. Rosderra Meats is the largest pork-processor in Ireland.
· Bord Bia report that pork demand in Ireland is mixed at the moment. Ham fillets, pork, bacon backs and sausage meat seem to be doing best. Recent fine weather conditions has also helped maintain strong demand levels for sliced cooked meats.
· Average grade E pig prices stood at 177.86/100kg in week ended 2 May. Prices have fallen by around 12/100kg since the end of February (-6%).
Ireland has had a stricter lockdown than in the UK, and schools are not expected to reopen until September. Reopening of restaurants is not explicitly mentioned in its roadmap to ease restrictions, so is likely to be months away.
The Netherlands supplies approximately 11% of UK pig meat consumption, and receives around 10% of UK exports. It is a key re-export destination, and also a net pig meat exporter itself.
· Recently, the Dutch pork market is reportedly faring better than Germany; apparently there are currently minimal difficulties with the number of pigs coming forward.
· Prices have already fallen sharply. The Vion 54% price was quoted as 1.65/kg for week ended 10 May, having been over 2/kg in mid-March (-21%). Some commentary has suggested the market may have reached the floor, with supplies now tighter.
The Dutch lockdown was less strict than some other EU nations. It is now starting to ease, with primary schools partially reopening. Outdoor spaces in bars and restaurants are also set to reopen from 1 June, with further capacity allowed from 1 July.
Spain supplies approximately 4% of UK pig meat consumption, and is a very significant EU producer and global exporter.
· Reports indicate the market is Spain is worsening. Although throughput has apparently been reduced, moving stocks of meat already accumulated is reportedly challenging.
· So far, falling pig prices are comparable to most other key EU producers. The Mercolleida price for week ended 10 May was 1.83/kg, compared with 2.05/kg at the end of March (-12%).
· Wholesale markets in Spain seem to be more severely affected than elsewhere in Europe though. German boneless hams and belly cuts are still trading at prices above 2019 levels. However, Spanish bellies are now similar to 2019 levels, while round cut leg and rindless picnic shoulder are both at a discount to last year.
Spain has had one of the strictest lockdowns in Europe. However, there are now plans to partially reopen schools from 26 May. Bars and restaurants are also set to reopen from 10 June, but only with 50% capacity due to strict social distancing rules. How much this supports demand remains to be seen, particularly as the summer holiday season will almost certainly be disrupted to some extent.
Although not directly linked to the UK market in particular, Italy is a significant importer of EU pig meat in general.
· The situation in Italy is reportedly very bad, with processing capacity reduced by 20-30%, and cold stores filled.
· Ham processing is particularly stalling.
· Pig prices have collapsed; the 160/176kg live price had fallen to 1.15/kg in the week ended 8 May, compared with 1.60/kg at the start of March (-28%). Current prices are the lowest at this time of year since 2010.
Italy has endured a long, strict lockdown. However, there are now plans to reopen bars and restaurants from 1 June. It remains to be seen how much this rekindles demand, helping to clear some of the volumes in cold stores. For processing to pick up, sufficient staffing levels will be required, which may also be challenging.
Poland supplies approximately 5% of the pig meat consumed in the UK and is a net exporter of pig meat. African Swine Fever is present in both wild boar and some domestic pig herds, meaning it is not able to export to most countries outside of the EU.
· Poland is more exposed to disruption on the EU market than most other key producers are, as it is not able to access the important Chinese market.
· Pig prices have fallen significantly- the Polish grade E reference price for week ended 3 May was 158.53/100kg, compared with 199.41/100kg at the start of March (-20%).
Restaurants in Poland remain closed (except for delivery services) for the time being. Schools are currently closed until 24 May, though this could be extended if necessary.