September 11th 1999

End of the crisis maybe in sight

By John O' Doherty, UCD

OVER the last number of weeks, there is evidence of a recovery in pig prices as the impact of the reduced sow numbers has finally began to affect the market. A year and half on, there are signs the end of the crisis is in sight. However, it will take at least two more months before supplies will appreciably affect price.

The present crisis was rooted in an over-reaction by producers to an expected pig shortage because of the 1997 swine fever epidemic.

The expected gap in the market did not materialise and the result was over production.

Both production and prices have now stabilised, and that the fourth quarter of this year will finally produce a reduction in numbers.

Pig prices should pick up then, and will continue to firm in the first half of 2000, helped by the recovery of some traditional EU export markets, and shipments of pig meat to Russia under the terms of the EU food aid programme.

Decreasing supplies

The pig statistics from around the EU would suggest that it will be October/November before we see a real drop in pig supplies.

The results of the May 1999 pig census in Germany showed a slight fall in breeding pig numbers compared to June 1998 levels at 2.74 million head.

However, fattening pig numbers were over three per cent higher while the number of weaner pigs increased by under one per cent to 6.8 million.

Lower numbers were also recorded in the Netherlands, Italy and France. The Dutch breeding herd reduced by 13 per cent in April. Mated sows decreased by 7 per cent while mated gilts reduced by 17 per cent. The French breeding herd reduced by 3.3 per cent in May.

The UK pig sector has moved into decline sooner than the rest of the EU with breeding pig numbers declining by 13 per cent in December and by a further five per cent in March.

Overall, UK pigmeat production is forecast to fall by 10 per cent this year.

Irish production levels are forecast to increase by around eight per cent during 1999. However, the results of the June pig census, conducted by CSO showed the first sign of contraction in the Irish pig industry.

Breeding pig numbers fell by almost four per cent. Finishing pig numbers (> 50 kg) were over eight per cent lower while the number of weaner pigs increased by five per cent.

These weaner statistics would suggest that it will be October/November before we see a real drop in pig supplies in Ireland.

The same time trend will exist in the other EU countries also.

Both Danish and Spanish pig numbers have remained strong throughout 1999. Denmark, the principal overseas supplier to the UK market, our main export market, reveals a 3.5 per cent growth on their July statistics.

Similarly, Spain reveals to an eight per cent expansion in its breeding herd in the April census.

Most of the increase in Danish production was expected to take place during the first half of the year while Spanish production looks like remaining strong for most of 1999.

Expected problems

There are also some problems that could slow recovery. Led by the US, a number of countries have banned EU food imports in the wake of the dioxin crisis, with even Russia halting delivery of its free pig meat for a period of time.

There are reports from the United States that pig numbers are still close to the record levels of last year. And, there is a drive to secure export markets at any price.

Due to dreadful pig prices, observers expected US pig numbers to fall. However, any slack has been taken up by corporate farms. This could threaten the recovery of export markets for European suppliers.

One problem for the entire meat industry is that the EC is releasing intervention beef back on to the market. This may have knock on effects down the meat chain, affecting the price of pork and poultry at the bottom end.

The forecast is that pig prices should pick up from now onwards. However, it will be early November before producers can expect to reap profits i.e. prices exceeding £1/kg.

Dioxin crisis

The dioxin crisis in Belgium and Holland has had a dramatic impact on consumers. European consumers are asking why it took three months to tell them that products from pork to chocolates may have been contaminated.

For Irish pig farmers this should help convince consumers to seek out home-produced bacon and pork.

The EU Commission are giving serious thought to how they can prevent the same depressing cycle of overproduction, followed by financial crisis, happening again.

But farmers are in a difficult situation. When prices fall, debts build. Paying these off over a smaller number of pigs means increasing the margin per pig, or increasing the time to clear the debt.