After Brexit, UK eating more homegrown pork

Feed prices and the domestic market may be key to UK pig farmers’ near-term futures, now that UK citizens have voted to leave the European Union.

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The domestic market and feed prices may be key to UK pig farmers’ near-term futures, now that UK citizens have voted to leave the European Union. The British pound dropped nearly 15 percent against the euro after the June Brexit vote, but UK pig producers may benefit from this currency situation short-term, according to Vikki Campbell, senior analyst for the UK Agriculture and Horticulture Development Board.

“Firstly, it will make UK pork more competitive against its European counterparts, so could help to boost exports,” said Campbell in an email. “Exports across the EU are already capitalising on the surging Chinese demand, at a strong price, so it may be expected that the weakening pound further supports UK exports.”

Cheap domestic pork

At the same time, the falling price of UK pork compared to EU meat may reduce pork imports. That would enable British swine producers to sell more meat on their home turf.

Approximately 40 percent of the pork consumed in the UK in the first quarter of 2015 came from domestic sources, according to AHDB Market Intelligence and EU Commission data. Those figures also show that UK consumption of domestic pork had already increased by several percentage points in the first quarter of 2016 compared to 2015. At the same time, the percentage of Danish pork, the second largest source, had dropped.

Costly imports

Although domestic demand may rise, the price of imported pig farming materials, such as fuel, may increase too.

“While the exchange rate movement may have a detrimental effect to UK producers input costs, the majority of the cost of pig production can be attributed to feed costs,” said Campbell. “Feed wheat futures have followed a similar path to the currency.”

Immediately after the June 23 Brexit vote, UK feed wheat futures price (Nov-16) climbed GBP4.80/t (US$6.35/t), Campbell said, which was the single biggest daily rise in the Nov-16 contract since it began trading. The Nov-16 futures price peaked at GBP124/t (US$164/t) on June 27, then began falling. Prices in July held relatively stable, while remaining GBP100/t (US$132) less than 2012-13 prices.

“Energy costs can account for less than 5 percent of the cost of production, said Campbell. “So while rises in these costs as a virtue of the volatile exchange rate will be unwelcome, their impact may be negated by the supported pig price due to the increase in exports and domestic consumption.”

Longer term Brexit effects on UK pig farmers.

The UK will remain a full member of the EU for two years under the terms of Article 50 of the Lisbon Treaty. During that time, the terms of the split will be determined. British Prime Minister Theresa May has said she will begin these negotiations at the end of 2016. This will be the first time that Article 50 has been used.

Campbell believes nothing drastic will occur to the UK pig industry until the process is further underway.

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