The rocketing price of feed, coupled with falling pig numbers and tough new EU pig welfare regulations threaten to send pork prices soaring.
Pork is currently the cheapest red meat on supermarket shelves - at £5.09/kg on average, compared with £6.74 for beef and £8.62 for lamb [Kantar Worldpanel/AHDB 52 w/e 2 Sep].
However, experts warned that this price gap was set to narrow dramatically. While the price of lamb has fallen (see digest right), pork prices were likely to rise by 4-8% in the next six months, predicted Andrew Knowles, Bpex’s head of supply chain communication.
One of the country’s biggest pork processors, Cranswick, revealed this week that it had begun price discussions with retailers to pass on rising wholesale costs. It blamed rising feed prices and the cost to European producers of implementing the sow stall ban, which comes into force on 1 January - and has already driven some farmers out of business.
Commodity prices 13 October 2012
All the biggest fallers were vegetable oils this week. After reaching a three-year low last week, palm oil prices in Rotterdam plunged another 6% to £540.6/tonne as demand from China remained weak and stock levels piled up.
The fall in palm oil prices had a knock-on effect on other oils. That, together with a better than expected US soyabean harvest contributed to a 13% month-on-month fall in soyabean oil prices to £717.1/tonne. Of the risers, plastics figured prominently, despite falls in crude oil prices. HDPE was up 12.5% month-on-month to £1,169/tonne as raw material price rises fed through.
UK electricity prices rose 12.7% on last month at £45.4/MWh and Bacton gas was up 10.1% to £62.6/100t eqvt.
These factors have led to a 4% reduction in the size of the EU breeding herd this year [AHDB] and the size is expected to decline further next year. They have also driven up prices.
The cost of pig production has jumped 7% to 170p/kg since June because of big increases in wheat and soya feed costs - and farmers are currently losing 15p for every kg they sell.
The average price farmers received for their pigs as of 29 September was 154.75p/kg, an 3% increase on five weeks ago, according to Bpex figures, and more inflation is likely. It would have to rise by another 10% for farmers to break even, which was likely to happen by next spring, said Knowles.
However, experts said pork would remain more affordable than other red meats. “Even with the rises suggested, pork will still look attractive versus beef or lamb,” says Investec analyst Nicola Mallard.
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