What are the reasons for the current pig price crisis in the Irish pig sector?

The pig crisis at producer level has resulted largely from extremely high feed and energy prices and lower demand from the number one global importer, China.

The European pig industry benefited from the impact of African swine fever (ASF) on Chinese production, especially from the beginning of 2019 up until the end of quarter one in 2021. On the back of higher producer returns during this period, this led to record EU pigmeat production at 23.6m tonnes during 2021. This has coincided with Chinese imports falling dramatically as its pigmeat production gradually recovered. By the end of 2022, Chinese pigmeat output is expected to recover to just over 51m tonnes from a low of 36m tonnes during 2020.

However, by the end of 2022, output is expected to recover to just over 51m tonnes. With the EU approximately 125% self-sufficient in pigmeat production, this softening in Chinese imports has significantly impacted trade levels.

Although China remains the number one partner market for EU pigmeat suppliers, this market accounted for 31% of EU pigmeat shipments during the first quarter of 2022 compared with 49% during the corresponding period last year.

How do Irish pig prices compare with other countries in EU?

The latest grade E pig price is making €1.67/kg deadweight excluding VAT. In comparison, the EU weighted average is making €1.85/kg deadweight excluding VAT. The year-to-date average shows the EU price around 8% higher at €1.62/kg deadweight, excluding VAT, compared to the Irish price.

What is the pig market outlook like for the rest of 2022?

The outlook for the remainder of 2022 remains challenging, although supply levels within Ireland and across Europe are expected to tighten further.

The impact of cost inflation is having a significant impact on sectors that are more intensive such as pigmeat and poultry, which are particularly exposed to high feed and energy costs.

Peter Duggan (Bord Bia).

Typically, feed costs account for around 70% to 75% of overall costs for pig producers. As a result, EU pig production fell by 7% to 3.4m tonnes during the first quarter of 2022 (note, Spanish and Dutch figures are unavailable for March and not included in this analysis). This shows the impact of low EU producer prices and higher production costs since the middle of 2021 into the first quarter of 2022.

The EU breeding herd in December 2021 fell by 3% to 10.9m head. Given the latest trends, where the Danish breeding herd fell by 6% in early May 2022 compared to a fall of 3% last December, this would suggest that when breeding herd figures are available for other member states during 2022, breeding herds are very likely to follow Danish trends. Elsewhere, US pigmeat production is expected to fall by 2% to 12.3m tonnes this year.

What has happened to the Chinese market and is it likely to come back to where it was?

Although Chinese pigmeat production is expected to recover during 2022, the level of recovery is quite likely to be overstated given that Chinese pig producers have been in a similar loss making position to European producers over the last year.

The USDA indicated in April that Chinese production would recover by 7% to 51m tonnes. The big difference in Chinese production now compared to the industry prior to ASF, is that production is largely controlled by significant entities, some of which are publicly listed companies and are positioned to absorb losses.

Although it remains to be seen how long these companies can continue to operate in this manner, the latest market signals would suggest that Chinese producers will also temper growth as Chinese producer prices and costs of production remain out of kilter.

Are there other international markets available to Irish pigmeat to replace the Chinese market?

The Irish pigmeat industry has a strong track record around servicing international markets. The pigmeat industry strategy is built around having the broadest portfolio of markets available, so that when a market does cool down, other markets can be easily tapped into. Since the Chinese market slowed down from the beginning of quarter two 2021, there has been strong growth in exports to South Korea, the Philippines, Japan, the US and Australia.

New export business with Mexico has also been secured during quarter two 2022. This market has significant potential. It is the thirrd largest global importer, and current high US pigmeat producer prices make Europe an attractive alternative supplier.

Is it just a case of too much pigmeat in Europe at the moment and we need to scale back production?

The EU pigmeat sector has been traditionally oversupplied. What we have noticed is that the Spanish industry has grown significantly over the past 10 years to become the number one EU supplier and has replaced Germany as the key European supplier.

EU pigmeat production will contract this year though on the back of extremely high input costs that are out of sync with producer prices. This is already impacting the breeding herd, and the combined threat of ASF spreading from Germany into other member states is a growing concern.

Irish supermarkets stocking Irish product – what is the situation in relation to Irish supermarkets?

The Irish market is a really important market outlet for Irish pigmeat suppliers. Just under a half of the total Irish pigs that are produced here are used domestically. The level of Bord Bia Q-Mark coverage on pigmeat products (sliced cooked ham, pork, bacon and rashers) marketed at retail level reached a record high of 88% during 2021.

  • Chinese pig production is expected to recover to 51mt in 2022 from a low of 36mt in 2020.
  • The Chinese market accounted for 31% of EU exports from January to April 2022 compared to 49% of exports for the same period in 2021.
  • The Government support model where a farmer with 50 sows gets the same funding as a farmer with 1,000 sows has frustrated pig farmers.

  • So far in 2022, EU pig prices are 8% higher than Irish prices.
  • It’s a similar situation in NI where pig producers are losing €41/pig at the moment.

    Next week

    We talk to Teagasc pig specialist Michael McKeon about feed prices around the world, how they are affecting Irish feed mills and pig farmers and what the outlook is like for the rest of 2022.