Prices rise as European supplies tighten

It IS all about the basic economic law of supply and demand setting the current market prices for pig, cattle and sheep, observed Quality Meat Scotland head of economics services Stuart Ashworth yesterday.

In the pig sector, he said, supplies were tightening across Europe: “While the Scottish June 2012 census made grim reading in terms of future supplies of pigs, so too did the census results from across Europe. All the major pig producing nations of Europe have reported lower sow herds this June than last year. The biggest decline was in Italy, at 14 per cent, and the smallest in Germany at 1 per cent.”

Part of the decline in numbers is down to non-compliant producers exiting the industry prior to the impending European-wide stall and tether ban which comes into force at the turn of the year.

“While in the short term this inflates the number of pigs slaughtered, supplies will begin to decline,” said Ashworth.

“Supplies are beginning to tighten up. Following the basic rules of economics, average farmgate prices for pigs across Europe have increased by 10 per cent since the beginning of August. More importantly the price is continuing to increase at a time when history would tell us to expect prices to fall.”

The news for Scottish pig producers is not so good, with prices having increased by a more modest 3 per cent. However, we have moved from a position where the UK price was higher than the EU average to a position where it is lower.

“Consequently competition for lower-priced European pig meat supplies has diminished and the recent improvements in producer prices are built on solid foundations.”

The story in the beef sector is also linked to prices holding firm because of tight supplies. “Slaughter statistics for August show UK prime cattle slaughterings 8 per cent lower than last year and 12 per cent lower in Scotland,” said Ashworth. “Across Europe beef production in the second half of 2012 is forecast to be down around 3 per cent.”

In contrast, lamb production, Ashworth said, was heading towards its seasonal peak in terms of volume. Poor weather conditions across the UK had certainly slowed lamb growth rates and slaughter volumes through June, July and August which all failed to match last year’s levels.

“While the Scottish census showed a modest decline in lamb numbers in June, England and Northern Ireland reported an increased lamb crop,” said Ashworth.