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AHDB Pig Market Weekly

25 March 2013

AHDB UK Pig Market Weekly - 21 March 2013AHDB UK Pig Market Weekly - 21 March 2013


UK Pig Herd Smallest in Over 60 Years

According to Defra, UK pig numbers on the 1 December totalled 4.2 million head. This was just over 2% lower compared with the same period last year and represents the smallest pig herd since the early 1950s, when the herd was still recovering following the Second World War. The latest numbers, released last Thursday, reflect the impact of higher feed costs since last summer which have hit the profitability of pig producers and led some to leave the industry or reduce the size of their herds. The majority of the decline was a result of a 3% reduction in the number of fattening pigs, which fell to 3.7 million head in the latest survey.

Pigs on UK Agricultural Holdings, 1 December

Source: DEFRA

There was also a 2% contraction in the female breeding pig herd, although this is in comparison with a figure for December 2011 which was lower than expected. The latest figure represents a fall of 6% compared with the number for June 2012, mainly due to a sharp fall in lactating/dry sows. In contrast, in-pig sows and gilts were both higher. This may suggest that producer optimism is returning, reinforced by the number of maiden gilts increasing by almost a quarter. Figures from Scotland paint a more pessimistic picture, with both the overall and breeding herd down by 13% and maiden gilt numbers down by 4%.

EU Production Down and Set to Decline Further

Latest figures confirm that EU pig meat production in 2012 was down 2% compared with the year before. The drop in production was more evident in the second half of the year (down 4%) than the first half (down less than 1%). The trend continued in December, with production down 8% year on year across the EU. Forecasts for this year, recently released by Eurostat, suggest a further 3% decline in pig meat production, with particularly notable drops in the second half of the year. Similar to last year, high productions costs continue to be the main factor hindering production. However, this is likely to be exacerbated later in the year by the impact of the new welfare regulations which came into force on 1 January.

EU 27 Pigmeat Production Trends

Source: Eurostat

For 2012 as a whole, there were some significant reductions from the major producing member states. Danish output was down by 7% since 2011 as the Danes exported more weaners in 2012 which reduced the numbers available for slaughter. The fall in German and French production was less, at 2%, but as the largest EU producer, even the small reduction in Germany will leave a notable impact on the overall output. However, the contraction in pig meat production was mitigated by increases in Spain (1%), Italy (3%) and the UK (2%) among others.

Producer Losses Continue Despite Lower Production Costs

Latest AHDB/BPEX provisional estimates for the average cost of pig production in March show they were over a penny lower than in March at just over 162p per kg. This is largely the result of a further easing of feed prices, with both wheat and soya prices lower. Despite these falls, feed continues to make up 65% of the overall cost of production and is the main reason why it remains high; at their current level, costs are around 9p per kg higher than in March 2012. Nevertheless, they are around 5p lower than three months earlier.

Total Cost of Pig Production Compared with the DAPP

Source: AHDB Market Intelligence

Despite their position having improved somewhat in recent months, producers are still making significant losses. Based on the current level of the DAPP, producers will lose around 6p per kg during March, equivalent to around £5 per head. Forward feed quotes suggest that the cost of production will remain high until after this year’s harvest so pig prices will need to increase before producers return to profitability. The situation may ease following the harvest, although this will depend on global weather conditions and the level of pig prices as the year progresses.

UK Pig Price

The EU-spec DAPP edged up for the week ended 16 March, at 156.31p per kg. This was still 15p above last year's level but the annual gap has started to narrow in the recent weeks. Throughputs for the week totalled 160,300 head, a small decline compared to both the week before and the corresponding week a year earlier. The smaller number of animals in the supply chain this week could partly explain the firm pig price with the relatively high EU price, in sterling terms, and some reports of improved demand also factors. The average carcase weight for the same period was marginally lower at 79.92kg.

GB 30kg Weaner Prices

Source: AHDB Market Intelligence

The weaner market continued its renewed upward movement in the week ending 23 March, reaching £47.74 per head. At the latest quote, the average price of a weaner was 46p higher than the previous week and almost £2 above last year's level. This represents the highest price since August 2010 and suggests some optimism about future prices, given that feed prices remain high.

Movement in the sow market was more subdued for the week ended 9 March as the pound stabilised against the euro; the weekly priced reached 105.04p per kg. This was marginally higher than the week before but the sow price remained 14p below 2012 levels. The estimated sow slaughterings for the week dropped to 5,000 head, lower than both the week before and a year earlier.

Strong UK Pork Exports Continue in January

UK pork exports increased on the year in January, the sixth consecutive month of growth, with frozen shipments up by a third. As well as 1,700 tonnes sent to China, volumes destined for the Netherlands almost doubled, while the German market remained the largest with an 8% increase in shipments. However, as has been the case in recent months, this increase was more than offset by a sharp fall in exports of cured pig meat, which were only a quarter of their level in January 2012. Both the main markets, Ireland and the Netherlands, recorded similar falls. Increased exports of sausages and offal helped ensure that overall pig meat exports were only slightly lower than a year earlier.

UK Pig Meat Trade

Source: HMRC

During the month, UK pork imports were up 2% year on year. This was mainly due to higher German shipments, which were up by a quarter. On the other hand, imports from France were more than a third lower than last January. Cured imports were lower, mainly because of a 19% fall in Danish supplies. At the same time, the upward trend in processed pig meat imports appears to have stalled. Despite an increase in sausage shipments, overall processed volumes were unchanged from last January, in contrast to the strong growth throughout 2012.

Feed Market Update

Nearby UK feed wheat futures have fallen a little further over the last week, closing at £197.75 per tonne on Tuesday. However, concerns over the domestic crop have narrowed the gap between old and new crop futures prices, with the November contract closing at £183.90. Latest trade data confirmed that the UK was still importing large volumes of wheat in January. US cereals futures rose slightly as export sales were higher, suggesting recent price drops have stimulated extra demand. Oilseed prices fell during the week as demand has slowed in anticipation of cheaper South American supplies.

EU Short-term Outlook for Agricultural Markets

The EU Commission has recently published the latest edition of its biannual short-term outlook for agricultural markets. It confirms that pig meat production is expected to decline by around 2% in 2013 but a slight recovery is expected in 2014, albeit by less than 1%. This is based on an expectation of lower feed costs and productivity gains in the sow herd. With lower supplies available, both EU consumption and exports of pig meat are expected to fall in 2013, by 1% and 14% respectively. Both are expected to increase in 2014 but remain below the levels recorded in 2011 and 2012.

The decline in pig meat production will contribute to a fall in overall EU meat production this year; beef/veal and sheep meat production are also set to fall, partly offset by a further increase in poultry meat output. However, prospects are somewhat brighter for the cereals and oilseeds sector. Outside the UK, favourable weather conditions have led to increased sowings, meaning the cereal area is forecast to rise 1.2% to 57.6 million hectares. With an anticipated return to normal yields, especially for maize, cereals production is forecast to rise 6.9% to 294Mt.

March 2013

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