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AHDB Pig Market Weekly

19 February 2013

AHDB Pig Market Weekly - 14 February 2013AHDB Pig Market Weekly - 14 February 2013

Latest AHDB/BPEX pig meat supply forecasts were published yesterday at the annual AHDB Outlook Conference. They indicate that UK clean pig slaughterings are set to be lower in 2013 than they were last year.


UK Pig Slaughterings Expected to Decline

This is the result of an expected decline in the size of the breeding herd due to the impact of higher feed prices since the summer. The situation will be confirmed when figures from the December census are published next month but a range of data provides evidence of a decline. This will more than offset any further improvements in sow productivity, leading to an estimated 2% fall in clean pig slaughterings for the year as a whole, with a larger drop in the second half of the year.

Actual and Forecast Supplies of Pig Meat in the UK

Source: AHDB Market Intelligence

Lower UK production would normally lead to increased pig meat imports to meet consumer demand. However, supplies are likely to be tight across the EU so imports are also likely to fall, particularly as the year progresses. At the same time, export demand will remain firm, from both EU and global markets. This may mean that, despite lower production, UK exports will be little changed, although they may drop in the second half of the year. As a result of these changes, less pig meat will be available for consumption in the UK. This, in turn, suggests further increases in retail prices, although this will depend on consumer confidence, which remains fragile.

Higher Retail Prices Drive Increased Spending on Pig Meat

In the 12 weeks to 20 January, spending on retail pork purchases increased slightly. This was driven by increases in average price, as the amount purchased declined 7%, due mainly to consumers purchasing less per trip. Chops/steaks and leg & shoulder roasting joints experienced volume and spending declines, while belly and loin joint purchases again recorded growth in expenditure and volume purchased. Loin roasting joints benefited from consumers switching away from other pork cuts, which helped to increase household penetration and boost purchases by 30%.

Annual Percentage Change in Retail Meat Purchases
(12 weeks to 20 January 2013)

Source: Kantar Worldpanel

Over the same period, spending on bacon was also higher than last year, again driven by price rises. Premium bacon sales grew due to new product launches from some major retailers. However, value bacon also recorded growth, with standard tiers losing out. The recent trend for sausages continued, with a 3% increase in spending and a decline in volume purchases. Fewer Y for £X deals may have impacted on volumes. Sliced cooked meats continued to record volume growth, driven by ham in particular. However, due to lower average prices, spending on ham fell 2%.

In the 4 weeks to 20 January 2013, the decline in volume purchases of pork accelerated to 13% and so, despite average price rises, spending also fell. Bacon purchases remained static with rises in average price again boosting spending figures. The decline in purchases of sausages accelerated to 9% while sliced/cooked ham also declined compared with last year, influenced by a dip in purchase frequency and household penetration.

Production of Compound Feed Rising But Breeding Pig Feed Down

Latest figures from Defra show that the amount of compound animal feed being produced in the final quarter of 2012 was 6% higher than a year earlier, despite higher prices. This partly reflects increased use of bought-in feed for ruminants, with the low quantity and poor quality of forage available meaning they were housed earlier and were more likely to require supplementary feed. However, overall production of pig feed was also up, by 3%. In contrast, production of breeding pig feed was down 4% during the quarter. This is consistent with other evidence suggesting a fall in the breeding herd since the summer.

Quarterly GB Retail Production of Pig Feed, 2011-12

Source: Defra

The figures also show that high prices relative to other cereals and limited availability have led to a small reduction in the use of wheat within compound animal feed in the final quarter. This has been compensated for by increased use of barley, oats, maize and by-products. Similarly, soya meal and sunflower meal have been replaced by cheaper alternatives such as rape meal and sugar beet pulp. Despite these changes, the average price of compound pig feed in the final quarter of 2012 was 14% higher than a year earlier and 5% up on the previous quarter.

UK Pig Prices

UK pig prices have fallen for the fourth consecutive week and in the week ended 9 February the EU-spec DAPP averaged 157.30p per kg. At this level, it was 0.38p lower than the week before and 3.12p less than in the week ended 12 January. However, compared with a year earlier it remained 17p higher as prices were also falling seasonally last year. Ongoing higher supplies of pigs contributed to this downturn with AHDB estimates indicating that the number slaughtered last week in GB totalled 176,000 head, 4,100 more than in the previous week and 16,000 higher compared with the same week last year. The average carcase weight last week was up 0.34kg to 80.2 kg and remained slightly higher than a year earlier.

The weaner market has remained well balanced and the average price of a 30 kg weaner, at £46.35 per head for the week ending 16 February, was up 3 pence on the previous week. Compared with a year earlier it was up £1.84. This represents a year on year rise of 4% whereas the pig price was up 12% suggesting that finishing remains under pressure from the higher feed costs.

In the week ended 2 February the sow price moved up considerably, the first week on week rise since mid November, reflecting a good market on the continent coupled with tightening supply there. The GB average, at 94.18p, was up 2.48p compared with the previous week but still 19p down compared with the week ended 17 November and 14p lower than in early February last year. The rise in the price contributed to estimated sow slaughterings increasing to 5,100 in the week ended 2 February, up 700 on the previous week but unchanged compared with a year earlier.

EU Pig Prices Stabilise Since Holiday Period

Following the continuous fall in the last quarter of 2012, the EU average pig reference price has stabilised since the New Year, standing at €169.16 per 100kg for the week ended 3 February. This stability contrasts with the normal seasonal trend of falling prices during January, followed by recovery from late January onwards. For the latest week, pig prices were around €14 higher than in the same week last year, when prices had started picking up; two weeks earlier the annual difference was over €20. The firm prices suggest that pig supplies remain relatively tight, given that consumer demand is normally subdued post-Christmas.

EU Average Pig Reference Price

Source: EU Commission

Since the start of the year, prices have been stable in most Member States. Amongst the key countries, prices continued to fall slightly in Poland and Denmark. In contrast, while the Spanish price remained below the high point in September, it increased during January and was among the highest in the EU; for the week ended 3 February, the Spanish pig price was around €13 higher than the EU average. By the same week, the UK reference price had fallen €14 since the last week of December, largely a result of the recent appreciation of the euro against the pound. While the UK pig price remains €9 above the EU average, the gap has steadily narrowed from over €20 at the turn of the year.

Danish Pig Numbers Stable

The latest figures published by Statistics Denmark show that the overall pig population on 1 January remained largely unchanged compared with the start of 2012. The total reached 12.31 million head; this was 1% down on the final quarter of last year but this is the normal seasonal pattern. The breeding herd followed a similar trend, with a small reduction for in-pig sows and a 3% fall in maiden gilts but a small increase in lactating sows.

Danish Pig Numbers, January

Source: Statistics Denmark

Piglet numbers increased on the year, showing some signs of further improvements in productivity. Nonetheless, the rise failed to translate into a higher count of weaners or fattening pigs. This was largely due to continuing growth in the weaner export market, with the Polish market attracting an increasing number in addition to the more established German market. Consequently, the total amount of pigs being fed for slaughter was down by 1%.

Producer Share of Retail Price Still Up on Last Year

Both pig prices and pork retail prices eased back slightly between December 2012 and January 2013. As a result, there was little change in the share of the retail price received by producers, which stood at just under 42%. This is more than three percentage points higher than in January 2012, with the DAPP 11% higher, while retail prices increased by only 3%. The share is now comparable to that received by sheep farmers, although it remains much lower than beef farmers’ share of 56%. Retail bacon prices are not yet available for the whole of January but provisional figures from the first three weeks show producers receiving 36% of the retail price, up from 32% in January 2012.

Percentage of Pork Retail Price Received by Producers

Retail price falls over the last month were mostly for legs and diced pork. Prices for most other cuts were little changed, while shoulder was 2% more expensive than in December. The picture was slightly different looking over the last year, with price increases for legs (+4%), shoulders (+6%), loin steaks (+4%) and traditional pork sausages (+9%). Only minced pork was cheaper than in January 2012, albeit by less than 1%.

Feed Market Update

UK LIFFE wheat May 2013 futures contracts declined by £10.25 on the week to £203.85 per tonne at the close on Tuesday 12 February given a largely neutral USDA report and improving new crop prospects. Chicago nearby maize futures were also lower over the week, falling $11 to $274 per tonne given a bearish USDA report. The EU-27 feed use of maize this season was increased by 2Mt to 50.5Mt, reflecting its competitiveness in feed rations.

Soyabean prices fell by $6.98/t last week to close on 12 February at $521.98/t as the USDA raised ending stocks even though South American soyabean production was unchanged, despite good yields reported in Brazil. Imported Hi-Pro soyabean meal from East Coast ports was worth £374 per tonne on Friday 8 February up by £10 on the week.

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