Earlier in July, Europe crossed a threshold not passed since August 2013 as prices moved above those in the UK. This started in April and shows no signs of easing. It is the first time Eurozone members have seen a significant year-on-year rise in prices since the heady days of 2013.
The stronger market in Europe has been driven by a combination of supply and demand factors, according to Agriculture and Horticulture Development Board (AHDB) Pork market intelligence manager Stephen Howarth. These include a tightening of supplies in several member states and a barbecue boom in Northern Europe. UK levy board AHDB Pork reports that more holiday-goers are staying in Europe rather than going further afield to North Africa and Turkey amid fears of terrorist attacks.
No siesta for Spain
“The weakening of the pound following the Brexit vote will have made UK pork cheaper than its EU counterparts,” said AHDB Pork analyst Vikki Campbell.
“Also, historically the UK price does not move at the same pace as the European price, given the way pricing contracts are implemented. These can be made up of a mix of the SPP, spot prices and various calculations, so increases in the price are fed through at a more modest rate than in the European market. However, the same factors that are increasing the EU price are having a positive effect on the UK price; namely strong export demand and a beginning of tightening of supplies.”
Export demand from China remains at record heights and most of the EU’s pork producers have benefited from the rising market. The Netherlands and Spain recorded the fasted increase in pork prices over the last month, after rising €19 per 100kg. Germany and France’s reference price jumped by €13 over the same period, whilst Denmark (€11) and Ireland (€5) also recorded an increase.
Current prices in the UK are around 9p lower than they were in July 2015. This may be eased by the fact that demand has very marginally outstripped supply, reflected in the fact slaughtering increased by 2%.
The fallout from Brexit and the weakened sterling is expected to make things more challenging for Britain as EU prices appear to be rising faster than in the UK. The EU reference price in sterling terms rose to around 130p/kg last week (9p more than the UK price) and at the current exchange rate, last week’s EU price would be equivalent to about 135p/kg.