July 9, 2008

Returns Set to Crackle As Health-Conscious Shoppers Pick Pork

By Dan Buglass Rural

PIG farmers have had a tough struggle over the past 12 months, with much higher feed prices and returns generally failing to cover production costs.

Ex-farm prices have, however, improved considerably in recent weeks, with average returns now at more than 133p per kg - their highest since 1997 and 30p higher than a year ago.

The UK pig industry has benefited from the relative weakness of sterling against the euro. This is especially true for the cull sow trade, which is predominately export-based. In the last week of June the value of UK cull sows, at 105p per kg, was an astonishing 60 per cent higher than at the same time year earlier.

The sector is smaller than it has been at any point in living memory. In 1998 production was 1.14 million tonnes, but this year it is likely to be little over 700,000 tonnes.

But pork is growing in popularity with consumers, according to a recent survey conducted for Quality Meat Scotland, the red meat promotional agency. The consensus among consumers is that pork is easy to cook, with 97 per cent of respondents agreeing that it "is really versatile for cooking with".

Laurent Vernet, head of red meat promotion for QMS, said: "These figures are a substantial success story for the industry and represent a massive turnaround in recent years.

"Research has shown a rise in health as the main reason for choosing a meal, and if some of these customers are aware of the health benefits of eating fresh pork, it could be a great support for the hard-pressed pig industry."

QMS initiated a six-week promotional campaign in March and April and the results reveal that 6 per cent more Scots were eating pork. In addition the Scottish market for fresh pork has been growing faster than any other regional market in Britain. Annual expenditure is up by 9 per cent to GBP 53.1 million, with volume rising by 10 per cent year-on-year to more than 11,400 tonnes, according to a survey by market analyst TNS.

Vernet said: "New customers are being attracted to pork, particularly in the 'dream demographic' category of young families with children, where there has been a growth of more than 20 per cent. The strongest levels of growth have come from people aged under 28, which has seen an expansion of more than 34 per cent on the year."

Any expansion in pork consumption in Scotland comes from a very low base. The per capita consumption in Scotland during 2006 - the last year for which figures are available - was a mere 1.6kg. For the UK as a whole it was 2.9kg. The weekly spend in Scotland in 2006 was just 15p per person, well below the 25p of England.

On the international front producers have been under massive pressure as a result of higher cereal prices, and many have left the industry. China is by some margin the largest producer in the world, with a forecast of 42 million tonnes of pig meat this year, according to figures from the Agricultural and Horticultural Development Board (AHDB). That may seem a lot, but it will be 3.8 million lower than in 2006.

The EU ranks second, with a projected production of 22.5 million tonnes for 2008, which will be almost one million tonnes higher than in 2006. But the reason for this expansion is the arrival on the market of sow meat from the large number of producers who are quitting the market.

Denmark is one of the largest producers in the EU, but the forecasts suggest a fall in output this year. Slaughterings at 20.5 million will be down by 4 per cent on 2007 with a similar decline in production to 1.73 million tonnes.

With supplies likely to be much tighter throughout Europe in the second half of this year, there is every prospect that producers' returns will improve.

Originally published by Dan Buglass Rural Affairs Editor.

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