Pork market outlook

November 2019
  • 2% rise in UK pig meat production expected in 2020
  • Imports may recover, after a significant decline this year. How much will depend on the competitiveness of EU product in the UK
  • 6% growth in export volumes expected, underpinned by China
  • Pig prices expected to rise on global demand

Overview

In 2020, UK pig meat production is expected to rise again. Although supplies on the market could recover slightly, they are likely to remain at relatively low levels, as strong export demand will continue.

UK production

The breeding herd appears to have grown modestly over the past year, supporting increased production. This is expected to continue.

Slaughter in the third quarter was a little higher than year earlier levels, and will likely increase further in the fourth quarter. Better herd performance this spring, as well as some expansion in the breeding herd late last year is now feeding through to the number of finished pigs available.

Further sow herd expansion in 2019, continuing into next year, when added to anticipated improvements in sow productivity, suggest that production will continue to expand throughout 2020 and 2021.

However, a risk to the production forecast in early 2020 comes from reports of disease difficulties this summer. As such, there is some uncertainty around growth rates, which if anything would be negative for production.

Nevertheless, carcase weights are still expected to continue rising on the whole, but probably not to the same extent as has been recorded this year.

Much of the political uncertainty that beset the industry in 2019 has for now been postponed, and so there is perhaps only limited scope for dramatic changes to the slaughter forecast over the next 12 to 18 months.

So, as with 2019, extra supplies of British pig meat will appear on the market in 2020. However, retail pig meat sales remain subdued, and within this, the higher-value fresh pork segment is in decline.

Unless this pattern reverses, exports will play an increasingly important role in setting domestic pig prices.

UK pig meat trade

Imports declined significantly this year. A fall in EU production, and subsequently lower product availability, combined with high real and anticipated export demand, led to strong growth in EU pig prices.

UK prices were slow to react, for both fundamental and technical reasons, although they have been picking up significantly for some weeks now.

The level of trade next year will be influenced by a number of factors. If the UK’s price relationship with the EU returns to normal, then imports could recover. If not, imports will remain suppressed.

A big unknown is the extent to which Chinese demand will directly compete with our own demand. Will China “outbid” UK domestic prices, and what will be the response of UK retailers?

In more usual times, UK production growth would be expected either to displace imports, or allow for export growth. Most likely because of carcase balance, it would be a combination of the two.

In the current climate, it is far easier to see how the UK’s pork sector will respond to increasing Chinese demand as an exporter, than as an importer competing for EU product.

With this in mind the forecast allows for a slight recovery in UK imports of 5%, following an estimated 9% fall in 2019. Exports will increase by an estimated 9% this year, and this is forecast to expand further next year, by 6%.

This forecast assumes business as usual access to European markets in 2020 and beyond.

Pork consumption trends

The number of meal occasions containing pork have been on an upward trend since 2017, but, while it peaked in the first quarter of 2019, it has now started to slow.

Data from Kantar has shown that volume sales of primary pork are still up 1.0% year-on-year (52 w/e 6 October 19). This is faster growth than poultry at +0.8% and a positive picture compared with other red meats.

The performance of cuts has differed, with volume increases seen for roasting (driven by shoulder), mince and steaks, while chops and belly are seeing declines.

Quicker-cooking primary cuts, as well as ready-to-cook products, win in the market. Leaner cuts such as loin medallions and steaks are also benefiting from increasing concerns about health.

Outside of primary pork, processed products are seeing longer-term decline. In the last year, bacon, sausages and sliced cooked meats have all been contributing to this.

For sausages, this differs greatly from 2018 when the summer heatwave boosted sales. The sausage category is now annualising with that strong 2018 performance. The downturn for processed comes from a backdrop of negative press coverage for processed meat.

For out-of-home, pork has seen a positive performance, with occasions growing +1.1% (MCA, 52 w/e June 19). This is driven by pork’s fit with quick food-to-go options (sausage rolls and sausage/bacon sandwiches), which is an increasingly important need out-of-home.

What next?

We expect a modest decline in primary red meat consumption in the short term, with ongoing pressure from the gradual shift from traditional meat and two veg options (such as chops) towards dish-based cuisines.

There is further pressure from consumers aiming to moderate consumption, often referred to as flexitarians. Kantar defines flexitarians more tightly as consumers cutting down on red meat for health reasons, and sizes this group of people at 9% of the population (July 2019). However, other reasons for cutting down meat are becoming more prevalent, with concerns around environment and animal welfare going up people’s agenda.

Continuing an upward trajectory for pork and mitigating any modest declines might be possible, if the industry:

  • Continues to innovate products to meet consumer needs of convenience and health
  • Inspires relevant pork dish-based cuisines
  • Addresses health concerns by communicating the health benefits of pork
  • Maintains and builds consumer trust, demonstrating where farming values (animal welfare, environmental stewardship and expertise) are shared with consumers.
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Gallery: Pork at a glance

Click the thumbnails below for simple visual explanations as to how the pork market has performed, according to the latest data. Here we look at GB pig prices (SPP and APP), consumption, slaughtering figures, international prices and import and exports.