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Outlook for 2013

There are a host of confounding factors, which will make forecasts of 2013 pig prices more difficult than usual. The consensus seems to favour a relatively quiet market in the early months of the year with prices moving ahead significantly as the expected contraction in supplies makes itself felt as the year progresses.

“Prophesy is a good line of business, but it is full of risks”, so said author Mark Twain and his observation seems very topical, as our market pundits started gazing into their crystal balls this January.
Pig prices ended 2012 on historically high levels but rising feed costs had put margins under pressure for most producers during the year. Feed wheat and soya prices seem to have eased back in recent weeks but historically low stock levels and unpredictable weather conditions may yet prove a continuing source of volatility in the year ahead.

Globally, we can expect to see pig production improving, as large-scale farming gains momentum in Russia, Brazil and China. The recovery in US production has been more precarious, but is, nevertheless, expected to continue to increase in the coming months and improve the presence of US pork in the SE Asian markets, especially.

The Chinese market will continue to have an increasing role in global pig meat trade. Although domestic production will continue to increase, a return to growth in the Chinese economy will continue to stimulate consumer demand for pig meat.

Russia joined the WTO in August last year but import access is still hampered by recurring trade disputes with a number of its key suppliers. The Russian veterinary authorities recently suspended imports of chilled meat from Germany, on the grounds that imports did not meet Russian food safety requirements. A lingering dispute remains regarding US and Brazilian pork due to the continued use of the controversial feed-additive, ractopamine.

Pig production in the EU already started to move downwards during the second half of 2012. It remains to be seen what effects the introduction of the new EU pig welfare regulations will have, but it seems inevitable that significant numbers of farmers, especially the smaller-scale producers, will choose to leave the industry rather than make the necessary investments to ensure compliance with the new rules. If this proves to be the case, this will have an impact on pig supplies during the second half of 2013.

On the demand side, pig meat has lost some of its competitiveness versus poultry and the other red meats. In the UK market at least, this already seems to have affected overall sales volumes across the various market categories.

In Denmark, although the number of pigs produced remained around 29m, continuing growth of weaner exports to Germany and, latterly, Poland, had a significant effect on the supply of domestic pigs for slaughter. It is to be hoped that some of the initiatives put in place by the industry in recent months will succeed in reversing this trend in the years ahead.

Danish pig trade (summary)  2010  2011  2012 
Live pig exports (m. head)  8,4  8,5  9,7 
Pigs slaughtered (m. head) 20,2 20,9 19,4