Never a dull moment
2013 was yet another rollercoaster year for European pig producers. Improving prices and lower feed costs meant that most producers returned to profit during the year. Weaners continued to exit Denmark in large numbers. In the UK market, the anticipated reaction to the introduction of the new EU pig welfare regulations was eclipsed by ‘Horsegate’, which has already resulted in much closer scrutiny on meat industry supply chains. As far as the retail trade was concerned, life was toughest in the middle ground as ‘savvy shoppers’ continued to seek better value for money. As price increases filtered through to supermarket shelves, most pig meat categories showed declining volumes as the year progressed.
Pig prices showed steady improvement for much of the year, especially on the UK market. The fall in grain prices also had a beneficial impact on producers’ profit margins, with feed accounting for up to 70% of the cost of producing pigs. Many more efficient producers were already producing at a profit at the beginning of the year and overall profit in the industry improved during the course of the year. The overall position is expected to show further improvement in 2014 against the backdrop of a further decline in the EU supply of pigs and stable feed prices.
Weaner exports from Denmark remained at high levels during 2013. In the first nine months of 2013, exports of weaners amounted to 7.4 million head, a similar figure to 2012. Exports to Germany fell slightly but numbers exported to Poland reached two million head compared to one and a half million head the previous year.
There was a clear message to the Danish government delivered at the Herning Congress in October. If the business environment was allowed to improve, pig finishing capacity increased and environmental regulation became more targeted, major benefits would flow to the Danish economy from higher export value and more domestic jobs.
The new EU pig welfare regulations came into force on 1st January. Denmark has been able to document full compliance with the new rules but concerns remain about the levels of compliance in many EU Member States currently supplying the UK market.
However, the discovery of the presence of horse DNA in a number of processed meat products in mid-January was the main issue that dominated public debate during 2013 and resulted in all major supermarkets and foodservice operators reviewing the traceability within their meat supply chains.
The home industry sought to exploit consumer concerns about the provenance of meat and the issue was once again put into the public domain with the recent publication of the interim recommendations of the Elliot Review, commissioned by DEFRA to improve the ‘integrity and assurance of Britain’s food supply networks’.
Denmark has been able to reassure its own customers about the robust and well-documented traceability within its integrated co-operative system.
The UK economy appeared to be returning to modest levels of growth during the second half of the year but most consumers (a.k.a. ‘savvy shoppers’) appeared more determined than ever to hunt down the best deal. The fortunes of the discounters, led by Aldi and Lidl, continued to flourish and Waitrose continued to perform well at the higher end of the market. In the fiercely contested middle ground, Sainsbury continued to put in a strong performance.
While higher prices were a boon for producers, the retail consumption of fresh pork, bacon and sausages showed a decline in 2013. Higher retail prices and the scaling back of promotional activity in the major supermarkets were undoubtedly key factors. Also the competitive position of pig meat in relation to poultry and beef was realigned as evidenced in the latest BPEX 'Meat Market Summary'.
The January edition of Pig Industry Matters will deliver our best assessment of the outlook for the pig industry in 2014 but, for the time being, our only prediction is one of ‘never a dull moment’ in our marketplace in the year ahead.
Festive greetings to all Pig Industry Matters readers.