Pigs Can't Fly But Their Prices Might - Livestock Price Update

The weaker sterling is affecting the UK's export/ import

balance, which is, in turn, strengthening demand for local beef

and lamb prices.

Until recently, the red meat sector has not experienced the

rapid increase in output prices that the dairy and most of the

arable sector have enjoyed. But it did experience the same fuel

and fertiliser input cost increases, with the added burden of

much higher feed costs from cereals and protein.

However, for much of the current year beef and sheep prices

have steadily moved up, with pig meat recently joining in. This

is not to say that all red meat enterprises have become

profitable, but there is at least some chance for more

efficient farmers to profit.

Beef

Beef prices have increased healthily since the beginning of

the year (Figure 1). The weakening sterling has helped, making

our exports more competitive on the continent and imports

dearer. For example, Irish beef once destined for the UK has

been diverted elsewhere in Europe. Furthermore, Brazilian beef

has been subject to import restrictions, further strengthening

UK domestic sales.

Despite this, total imports to the UK declined by only 1% as

supply from Argentina and Uruguay compensated. But it seems

that restrictions on supply will continue through 2008, helping

to keep prices buoyant. This is all good news for beef

producers, but as we do not expect the price of feed, fuel and

fertiliser to ease, further price rises are necessary to cover

the increase in these inputs as most beef producers are still

losing money.

Sheep

As with beef, declining imports and rising exports (thanks

to the weakening pound) have helped lift the lamb price from

the lows that can be traced back to last autumn's

foot-and-mouth disease scare (Figure 2). The volume of UK

exported sheep meat rose by 16% from January to March 2008

compared to 2007, with France remaining the largest export

market.

Furthermore, an increase in supply of home grown sheep meat

has reduced the demand for imports, while drought and meat

being diverted to other EU markets has also played a role.

Pigs

Breeding sow numbers have been falling for the last decade.

This has now led to a reduction in domestic supply. At the same

time, global numbers have been falling and input costs rising

rapidly. This has resulted in...