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News and analysis on the global poultry
and animal feed industries.
on October 1, 2008

End of EU pig crisis in sight

The EU pig reference price has increased sharply and with the new harvest, cereal prices are falling, starting to result in lower spot pig feed prices.

The European Union (EU) pig market has been in crisis since last autumn mainly because of the sharp rise in feed costs. As a result, pig breeding herds in most major producing countries have been in sharp decline in 2008.

However, since the spring of this year, the EU pig reference price has increased sharply and with the new harvest, cereal prices are falling, starting to result in lower spot pig feed prices. Producers buying feed will eventually start to benefit from falling feed costs depending on the renewal date and length of their feed contracts.

It seems unlikely that feed prices will return to the levels of pre-autumn 2007. The EU cereals market is still quite firm by historical standards, while the EU import price of soya bean meal in August was 35 percent higher than a year earlier. The feed industry is very dependent upon soya from the world market given the small output in the EU.

The EU Commission calculates an EU pig-to-feed price ratio in index form. By last winter, it had fallen to less than 70 (compared with 100 for the 1980-82 average). In August 2008, the index had recovered to 90 although it was still well below the average of 2006 and 2007. However, the decline in cereal prices during August has yet to be reflected in the average feed price and the index can be expected to move up sharply in the autumn.

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The EU pig reference price averaged €174 per 100 kg dw in August, 19 percent more than a year earlier and as much as 34 percent higher than the low point of October 2007. During the first three weeks of September, the average moved down slightly but the Hannover futures market indicates that by summer 2009 pig prices will rise by a further 7 percent.

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The weaner market is also firmer and the EU price in August 2008 averaged €38 per head, a rise of 22 percent compared with a year earlier, but still 18 percent less than the average for 2006.

The European pig meat market is very homogenous and pig prices have moved up sharply in all member states. Price rises have been especially marked in Poland. Polish prices in early 2007 were one of the lowest in the EU, but by August 2008 they were one of the highest and on a par with prices in Germany and Italy. The German market is the largest in the EU and inevitably developments were in line with those of the EU market as a whole. The Dutch price has also reflected the movement in the EU price but being an exporter at somewhat lower levels.

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