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AHDB Pig Market Weekly

28 February 2013

AHDB Pig Market Weekly - 28 February 2013AHDB Pig Market Weekly - 28 February 2013

The strong recent export performance of UK pork continued in December, with China again the key growth market, taking the second largest volume of UK exports for the second consecutive month.


UK Pork Exports Remain Strong in December

As a result, pork exports for the year as a whole were up 7%, with most of the growth in the second half of the year, making 2012 the best year for UK pork exports since 2000. However, the increase in pork exports was more than offset by a sharp decline in shipments of bacon and ham. There was a more positive picture for exports of processed pig meat products and, more significantly, offal. The main driver of growth in offal shipments was increased demand from other EU countries, which was up 82%, likely for use in manufactured products or for re-export.

UK Pig Meat Trade

Source: HMRC

The UK imported less pork in 2012 than in 2011. The decline was largely the result of tighter supplies in the rest of the EU. In December, shipments were again down year on year, mainly the result of a fall of over a third in Danish supplies. Bacon and ham imports were also lower in 2012 and the decline in the final month of the year was even sharper. The falls in pork and bacon imports have largely been offset by increased volumes of processed pig meat. However, growth has slowed as the year progressed and in December, sausage imports were down on a year earlier, while other processed pig meat shipments were unchanged.

Producer Losses Continue Despite Lower Production Costs

According to AHDB’s provisional estimates, the average cost of pig production in February is just under 165p per kg, around four pence lower than in January. This is largely the result of a fall in prices for compound pig feed, with both cereal and oilseed prices easing somewhat since the New Year. Nevertheless, production costs remain high by historic standards, being only around 5p per kg lower than the record level recorded last summer. The February estimate is around 17p higher than a year earlier, equivalent to an extra £13.50 to raise a pig to slaughter weight.

Total Cost of Pig Production Compared With the DAPP

Source: AHDB Market Intelligence

With the pig price falling at a similar rate to the drop in production costs, producers remain in a loss-making position. Based on the current level of the DAPP, producers are losing around £7 per pig during February, similar to the average loss during 2012. Cumulative industry losses since the start of 2012 are now estimated at around £70 million. Forward feed quotes suggest that the cost of production will remain well above the recent level of pig prices until after the harvest. Thereafter, the situation may improve but this will depend on global weather conditions and on pig prices remaining high.

UK Pig Price

The EU-spec DAPP was marginally higher for the week ended 23 February, at 156.07p per kg, the first rise since early January. The price paid to farmers remained much stronger compared to the corresponding week in 2012, with a difference of nearly 17p. Records indicate that the first increase following the New Year fall came a week earlier than in the previous two years, although it remains to be seen whether this will be sustained in the coming weeks. Estimated throughputs for this week totalled 163,400 head, 2% above 2012 levels, continuing the trend for the year so far. However compared to the week before, 1,600 fewer pigs were slaughtered. For the week ended 23 February, carcase weights averaged 80.23kg, a small rise from the previous week.

GB Cull Sow Prices

Source: AHDB Market Intelligence

The cull sow market picked up further in the week ended 16 February, as the price reached 97.48p per kg. At this price, the producer received nearly 3p more compared with the week earlier. The AHDB estimated slaughtering figures showed that a total of 5,100 sows were culled in the week. Numbers culled so far this year have been similar to a year earlier. The majority of the increase in sow quotations is the result of firmer prices on the continent coupled with the weak pound. Nevertheless, the latest price is still much lower than a year earlier, with a 17p annual difference.

For the week ending 2 March, the weaner market edged up again by a small 7p, reaching £46.45 per head. The difference between the latest price and a year earlier stands at just under £2.The price of a 30kg weaner has remained virtually unchanged since the end of November and is unlikely to move until the direction of finished pig prices in the spring becomes clear.

UK Slaughterings Up in January, With Carcase Weights at Record High

UK clean pig slaughterings in January 2013 totalled 954,000 head. This was nearly 2% higher than in the same month last year. The mild weather before Christmas helped to ensure that pigs grew well, which meant that some were able to come to market earlier than usual. Colder conditions since the New Year could lead to lower numbers in the coming months, particularly as the impact of any decline in sow numbers last year becomes more apparent. Scottish throughputs were again down by more than half, with most of these pigs transferring to England, where slaughterings were 7% higher than last January. In contrast, numbers in Northern Ireland were virtually unchanged compared with a year earlier.

Average Weekly UK Clean Pig Slaughter

Source: DEFRA

Another effect of the good growing conditions pre-Christmas is that the average clean pig carcase weight was the highest ever recorded at 79.8kg. This increase was apparent in all parts of the UK but there was a particularly sharp increase in weights in Northern Ireland. Adult pig slaughterings in January 2013 were close to year earlier levels at 25,400 head. This will have been partly influenced by the low prices for cull sows during the month, which may have reduced replacement rates to some extent. With higher slaughterings and heavier carcase weights, pig meat production rose by just over 2% to 79,800 tonnes.

Small Fall in German Pork Trade

As the EU’s largest producer, consumer and trader of pig meat, Germany is at the centre of the EU pork market. With production in 2012 down about 2% on the year before in both Germany and the EU as a whole, supplies available to be traded were tighter. This led to small falls in both German imports and exports of pork. Exports were down 2% overall, with shipments to other EU Member States down by nearly 5%, although they still make up 80% of German trade. As well as the lower supplies, this reflects subdued consumer demand, notably in Italy, the leading export market. In contrast, exports to non-EU markets increased by 11%, despite shipments to Russia falling by nearly a quarter. The growth was driven by China but Ukraine and Belarus were also significant.

German Pork Trade, January - December

Source: Statistics Germany, GTIS

The supply situation also led to a 2% fall in German pork imports, with the three major suppliers, Denmark, Belgium and the Netherlands, all affected. This was partly offset by increased shipments from some smaller providers, including Spain, France and the UK, the latter mainly made up of sow carcases. Trade in cured and processed pig meat products was similarly subdued. Germany is also a major importer and exporter of live pigs. Imports were little changed at 13.2 million head, with shipments of both weaners and slaughter pigs stable. Live exports were up 12% at 3.2 million head, mainly due to more slaughter pigs being shipped to Poland.

EU Slaughterings Down Again in November

After a stronger month in October, EU pig slaughterings in November were again lower than a year earlier. Throughputs for the month were down 3% at 21.1 million head. The fall wasn’t universal, with several major producers recording higher slaughterings than in November 2011, including Belgium, Denmark, Italy and the Netherlands. In contrast, throughputs were down by 3% in Germany, 4% in France and Spain and 9% in Poland. This brought the decline for the year as a whole to 2%. As in previous months, a small increase in carcase weights meant that the decline in pig meat production was slightly smaller, with November production totalling 1.89 million tonnes, a fall of less than 3%.

EU Pig Slaughtering Trends

Source: Eurostat

December figures for those countries which have released data, making up around half of the EU total, indicate a further sharp fall in slaughterings, with the average drop in these countries nearly 7%. For example, German throughputs were down 8% on December 2011, while France slaughtered 7% fewer pigs. Romania and the UK bucked the trend, as they did for most of 2012.

Feed Market Update

Cereals prices eased slightly over the last week, although the weak pound meant the fall in UK prices wasn’t as large as elsewhere. Beneficial precipitation in the US had led to improvements in crop conditions, even before winter storms in the last few days which have added further moisture. At last week’s USDA conference the agency released their first forecasts for the US 2013 harvest, predicting a rebound in maize yields but a 7% fall in wheat production due to poor crop condition so far. A large planted area could give potential for record maize production, predicted to be 364.5Mt (35% up on 2012 harvest), although with the crop not even planted yet all forecasts are tentative and weather dependent.

International soyabean prices also fell over the last week as weather conditions in South America remain favourable, although that is yet to be reflected in prices on the domestic market. Logistics problems in Brazil, with a dock workers strike adding to the problems, are giving some support to prices, with some buyers switching to US soyabeans in the short term.

Firm Irish Exports in 2012

In 2012, Ireland exported 130,700 tonnes of pork which was 5% more than the year before. This came on the back of some rise in domestic pig meat production. The increment came in spite of a 17% rise in the average export price of pork. The small lift in the Irish market is largely a function of good trade during the first three quarters of 2012. However, between October and December, exports were 13% lower compared with the corresponding period in 2011. Exports of processed products, most of which were destined for the UK, were also higher than the year before.

Irish Pork Exports, January - December

Source: Central Statistics Office, GTIS

Traditionally, Ireland enjoys trading with the UK market and in the last year, 16% more pork was shipped to the UK. There were also further increases in trade with China as Irish pork supplies to the country increased by a notable 57%, increasing its share of the export market to 15%. However, lower shipments to China in the final quarter of the year were the main reason overall Irish exports were lower. Russia followed the increasing trend, accepting nearly 11% more Irish pork compared with 2011. In contrast, demand from other EU markets was lower, with shipments down by 11% year on year.

February Pig Market Trends Out Now

The February edition of Pig Market Trends (PMT) was published on Tuesday. As well as the usual coverage of producer prices, slaughterings and production, trade, retail sales and prices, costs of production and other industry news, this month’s edition cover the outlook for UK pig meat supplies.

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