Pig recovery to face challenges in 2017
According to Teagasc’s annual outlook, high global grain stocks and a record Brazilian soybean harvest will keep feed supply up in 2017, but growing Chinese demand will absorb much of this and the weakening euro/dollar exchange rate will erase any potential price gains. This should leave the average pig feed cost at around €290/t throughout next year.
The pigmeat market is proving harder to predict. After driving the rally in global prices in recent months, Chinese demand is expected to remain high in the first half of 2017 as the authorities there apply stricter environmental rules to piggery development. “In the interim, the shortfall will continue to be filled by European and American exports, which will further reduce the volume of pigmeat overhanging the European market,” wrote Teagasc pig specialist Michael McKeon. “However, in the latter part of 2017, it is expected that the level of exports may weaken, thereby reducing the Irish pig price. Overall, a 2% decrease in the pig price is forecast for 2017.”
The other factor that could influence global prices would be a disease outbreak in a major producing country, as illustrated by the PEDv outbreak in the US in 2014.
After falling to a 20-year low last March, the margin over feed caught up in recent months and works out at 43c/kg for the full year of 2016. Teagasc estimates that profitability will be back slightly at 42c/kg next year, but warned of the uncertainty associated with this forecast. This is especially challenging in the light of the late 2015 and early 2016 slump, as “the industry requires a period of prolonged profitability in order to reduce current high levels of feed credit and undertake required repairs and capital investment”, McKeon concluded.