Pork market outlook
- 4% rise in UK pig meat production expected this year
- Imports to fall further, as COVID-19 related disruption limits demand
- 6% growth in export volumes, underpinned by strong Chinese demand
- Pig prices expected to remain high as global pork shortage continues
This year, UK pig meat production is set to rise again. However, demand is expected to fall further, following disruption in the foodservice market due to COVID-19. Supplies on the market will therefore be balanced by lower import levels, alongside strong export demand, which is expected to continue.
A more in-depth look at the outlook for the British pork market can be found here.
Following strong slaughter growth in late 2019 and early 2020, we now think the breeding herd grew by about 3% last year. Further modest growth is expected this year.
In the short-term though, slaughter is likely to be similar to, or lower than, year earlier levels. Historic challenges to herd performance are now feeding through to the number of finished pigs available. However, we anticipate these difficulties have now eased, and that productivity will now return to an improving trend. This, combined with the breeding herd expansion, means more finished pigs should be available later in the year. We also expect production to continue expanding through 2021. Higher carcase weights will also support amount of pig meat produced.
How herd performance develops remains a risk to the forecast. If performance does not improve as expected, slaughter could fall short of expectations.
Uncertainty remains a feature of the outlook due to both COVID-19 and the UK’s departure from the customs union at the end of 2020. However, there is only limited scope to significantly change slaughter levels over the next 12-18 months. More British pig meat is expected to be produced over that time, though overall demand for pig meat in the UK likely to be lower. Trade will play an important role in balancing the market.
UK pig meat trade
Imports have declined significantly so far this year. This is partly because of stockpiling activity early last year, but retail demand was also sluggish early in the year and more recently, COVID-19 restrictions have virtually eliminated foodservice demand. Increasing UK production also allows for some import displacement.
Even though EU prices have recently dipped back below the UK, it seems unlikely imports will be higher in 2020 overall. We anticipate a fall of 5%. Growth in retail demand is not expected to fully compensate for the loss of the foodservice market.
Here we have also assumed that Chinese demand remains strong, and in fact improves later in 2020. This would continue to draw product from the EU market. Of course, if access to, or demand from, this market is disrupted, larger volumes of low-priced pork in Europe might add to import pressure.
We have also assumed strong Chinese demand will fuel a further 6% growth in our exports this year, supported too by the expansion in our production levels. Next year though, Chinese production may recover a little, and the prices on offer may be less attractive. This might make further increases more challenging.
This forecast assumes business as usual access to the EU market in 2021, and uses an optimistic demand scenario for COVID-19 recovery (see scenario A in the scenarios for exiting lockdown).
Pork consumption trends
Prior to COVID-19, total pig meat performance was seeing volume declines in retail of -3.5% (Kantar, 52 w/e 23rd Feb 2020), but growth in the eating-out market of +1.1% (MCA, Y/E Dec 2019). Losses in retail were coming from both primary and processed with the latter continuing to experience challenging times as leaner primary cuts such as loin medallions benefited from growing health concerns. The need for convenience also affected roasting joints.
During COVID-19, pig meat in retail grew significantly with volume growth +14.3%, in line with total food and drink at +14.7% (Kantar, 12 we 17 May 2020). This is an additional 31 thousand tonnes of pigment sold in the last 12 weeks, with over three quarters coming from processed products. During lockdown sausages and bacon benefitted from the need for practical, easy family dishes, more hot breakfast occasions and the BBQ season starting early. This growth in retail is welcomed due to the closure of eating-out establishments where full English breakfasts, sausage/bacon sandwiches and sausage rolls are the top pig meat dishes. Primary also saw growth in retail through all cuts due to its affordability compared to other proteins - a significant factor for money-conscious shoppers.
Looking at retail volumes for the remainder of the year, pig meat will continue to gain in all scenarios. However, eating-out losses will result in an overall decline for pig meat. Under Scenario A, pig meat volumes will reduce by 2% - the smallest loss of all meats.
For pig meat, retail usually accounts for approximately 82% of volumes, compared to eating-out volumes of 15%. Under scenario A the eating out market contracting by half outweighs the growth predicted in retail, resulting in the overall decline. Pig meat, unlike other sectors, is not benefitting from the positive performance of the food delivery and takeaway market as it only accounts for 1% of pig meat volumes.
As restrictions in the eating-out market are even tougher in Scenarios B and C, this accelerates the declines predicted for pig meat, although not to the extent of other meats. Under Scenario B, overall pig meat volumes would reduce by 3%, while Scenario C would result in a loss of 5%. The lower price point of pig meat will be an advantage as the economic impact of the pandemic intensifies across the scenarios.
To mitigate losses:
- Maintain affordability but ensure this is across the whole carcass to avoid balance issues. Continue to push versatile cuts such as pork shoulder and medallions.
- Innovate pigmeat in the food takeaway and delivery market. Consider how top dishes eaten out-of-home could be transferred to the delivery method.
- Address health concerns by communicating the health benefits of pork.
- In the longer term look to maintain and build consumer trust, demonstrating where farming values (animal welfare, environmental stewardship and expertise) are shared with consumers
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