Latest forecasts confirm that expectations of a recovery in the EU market in the short-term may be premature and 2016 looks likely to be another difficult year for EU producers.
There is little doubt that the recent weakness of UK pig prices has been affected by the low prices in the rest of the EU. There was a widespread expectation that, despite relatively low feed prices, this would lead to many producers reducing their herds or leaving the industry altogether. Results from the December 2015 pig census confirm that this has indeed happened in a number of Member States. However, expansion elsewhere, notably in Spain, has limited the reduction.
Based on the December census results, the EU Commission’s forecasting working group for pig meat updated its forecasts at a meeting in Brussels on Monday.
The new estimates from group members, coupled with official ones from those Member States not represented at the meeting, show EU pig slaughterings in the first half of 2016 slightly higher than in the same period of 2015. For the second half of the year, the latest forecasts have production starting to fall back, albeit only marginally in the third quarter.
The working group also produces quarterly price forecasts for the coming year. Prices are forecast to rise during the spring and summer, assuming reasonably favourable seasonal demand. However, they are not expected to get any higher than they did last summer. With supply tightening to some extent in the latter part of the year, prices are not expected to fall back as sharply as in the last two years, meaning they could move above year earlier levels. How these trends affect the UK market will, of course, also depend on the exchange rate between the pound and the euro.