Pork market outlook

January 2021

  • 4% rise in UK pig meat production expected this year
  • Imports to fall further, pressured by large domestic supplies and a forecast decline in consumption
  • 7% decline in export volumes, underpinned by weaker Chinese demand and disruption to UK exports to the EU
  • Pig prices expected to remain under pressure
  • High levels of uncertainty in the market

Overview

This year, we expect UK pig meat production to rise again. Demand is expected to fall further, as the expected recovery in the eating-out market will not compensate for the decline in retail volumes. Supplies on the market are therefore be expected to be balanced by lower import levels. However, exports are also expected to decline, due to weaker Chinese demand, and disruption to trade following the UK’s departure from the EU.

A more in-depth look at the outlook for the British pork market can be found here.


UK production

We believe there was a small increase in the size of the breeding herd in 2020. Reports suggest that there is little appetite to expand in 2021 at present, due to the uncertainty in the market. We therefore expect that the breeding herd will remain relatively stable this year.

We have forecast clean pig throughputs at 11.2 million head in 2021, around 3% more than in 2020. This rise in slaughter will be driven by the slightly larger breeding herd, expected improvements in productivity, and the current backlog of pigs.

In the final quarter of 2020, processors’ kill schedules were disrupted due to COVID-19 related challenges, leading to a number of pigs backed up on farms. We expect the extra numbers will likely be worked through in the second quarter of this year, when typically the numbers of pigs coming forward would usually be lower.

Note that in Q2 2020 slaughter was low, as processors pulled pigs forward into Q1 to avoid potential issues at the start of the pandemic. As a result, a large annual increase in Q2 2021 is expected, also partly because it is being compared to an abnormally low period of slaughter in 2020.

There is uncertainty surrounding the number of pigs currently backed up on farms, due to the limited data available at present. It remains to be seen how slaughter capacity will function in the coming weeks. Therefore, there is more uncertainty than usual surrounding slaughter levels in the first half the year, which is a key risk to this forecast.

Carcase weights have increased sharply in the last few years, with 2020 recording the highest weights on record. We expect this trend to continue into 2021, particularly while the issue of the backlog is addressed.

Rising slaughter and heavier carcase weights mean UK pig meat production is forecast to reach 1.02 million tonnes in 2021. If realised, this will be 4% higher than in the previous year and would be the first time production surpasses the 1 million tonne mark since 1999.


UK pig meat trade

This forecast uses a demand scenario in which the year is broadly in two halves. In the first half of the year, a full lockdown until mid-February has been assumed, followed by a partial easing of restrictions. In the latter half of the year, it has been assumed that restrictions have eased to allow the eating-out market to re-open albeit with social distancing measures in place. 

There have been some reports of disruption to trade following the UK’s departure from the EU. We understand that so far this has mainly affected export flows. We have therefore assumed some level of disruption to exports in the first half of the year.

Exports

It has been widely reported that China has been active in re-establishing its domestic pig herd following the ASF epidemic. Due to rising domestic production, Chinese demand for imported pork is expected to decline in 2021, with the USDA forecasting a decline of 10%.

With the EU market facing its own challenges with backlogs and export bans, this market is positioned to be well supplied in 2021. Although British prices are typically higher than those in the EU, there will be additional costs to doing business associated with leaving the customs union. This could make the EU market more challenging this year.

We expect UK pig meat exports (excluding offal) to fall by around 7% this year. However, this will be dependent on the extent and duration of disruption associated with leaving the EU.

Imports

We expect import levels to decline again this year. Overall consumption of pork is expected to be 2% lower than in 2020. Anticipated growth in the eating-out market is not expected to be enough to fully compensate for lower volumes in the retail sector. The combination of increased domestic supplies and lower exports would also contribute to lower demand for imported product.

The reality of a well-supplied European market could result in some pressure from cheaper EU pork. Our estimates suggest consumption of pig meat increased in 2020 compared to the year before. However, the sharp drop in imports indicates that supplies available on the market were lower. This suggests stocks would have been drawn down in order to supply the market. If this is the case, there may be some desire to replenish stocks with low-priced EU pork while it is available.

Nonetheless, if we assume import supply availability remains somewhat constrained by poorer demand, we anticipate UK pig meat imports in 2021 will be about 8% lower in 2020, at 810,000 tonnes carcase weight equivalent.


Price outlook

Price for GB pigs are likely to remain under sustained pressure. What started with African Swine Fever in Germany, was compounded COVID-19 limiting both slaughter capacity and access to China for some facilities. Logistical and administrative difficulties in exporting because of EU-exit, affecting sow carcases in particular, have brought even more headwinds to the sector. With falling farmgate prices at one side, and rising input costs at the other, farm profitability is severely challenged.


Pork consumption trends

Pigmeat has proved to be a go to in-home meal option during the COVID-19 pandemic. It has seen significant volume growth every month since March 2020 and overall in the last 52 weeks volumes have grown +8.3% (Kantar, 52 w/e 27th Dec 2020). This is an additional 79,000 tonnes of pigment sold in 2020, with three quarters of this coming from processed products. According to Kantar Usage sausages and bacon have benefitted from more in-home hot breakfast/lunch occasions, while sliced cooked meats have grown at a slower pace due to the loss of take-out lunches. Primary pork also saw growth for all cuts due to its affordability compared to other proteins – a significant factor for money-conscious shoppers. Fastest growing cuts include belly, diced and ribs, as consumers experiment through scratch cooking.

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 pigmeat dishes. During 2020 we estimate the eating-out market for pigmeat saw volume declines of -54%. However, we predict the strong growth in retail, coupled with an increase in takeaway and delivery, has outweighed these losses, netting out at volumes being +1% at the end of 2020.

What next?

Despite entering 2021 in another national lockdown we anticipate a return to some normality in the second half of the year.

Overall retail volumes for pigmeat, and other red meats, are not predicted to achieve volumes seen in 2020 which were bolstered by panic buying. However, pork’s lower price point in the current economic situation will benefit retail volumes which will continue to be higher than 2019.

As lockdown eases the eating-out market will start to re-open. However, it is not predicted to fully recover. This impacts pigmeat more than other red meats as 13% of pigmeat volumes typically go through this market (compared to 11% for beef and 7% for lamb). A big driver of this is food-to-go which will start to see a recovery but potentially not as fast as other parts of the market, as working from home becomes more of the norm for some. Foodservice volumes will benefit from increased takeaway and delivery participation, however for pigmeat it only accounts for 1% of volumes and is therefore not big enough to compensate for eating-out losses.

As a result of these anticipated trends, total pigmeat volumes for the full year 2021 are expected to be down -2% year-on-year and when comparing back to 2019, being a more typical year, volumes are down slightly at -1%.

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, as demonstrated in our pulled pork campaign, 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

For more information on the scenario please click here

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Visit the Trade section for more information For more detail see the full Pig Market Outlook

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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.

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