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AHDB Pig Market Weekly

26 April 2013

AHDB Pig Market Weekly - 25 April 2013AHDB Pig Market Weekly - 25 April 2013


Producer Losses Lower in April

According to AHDB’s provisional estimates, the cost of pig production in April fell for the third consecutive month to 162p per kg. A small fall in feed prices remained the main factor affecting the latest cost of production. The estimated figure was around 2p lower than March but was at a similar level to early summer last year, before the rapid rise in feed prices post-harvest. However, compared with the same month in 2012, costs are almost 9p higher but they were lower than 2011 levels for the same period, when feed prices were even higher.

Total Cost of Pig Production Compared with the DAPP

Source: AHDB Market Intelligence

Despite a fall in the cost of production, based on last week's DAPP, producers were still losing an estimated £2 per pig. This is equivalent to a loss of 3p per kg. However, producer returns have improved since the start of the New Year, with losses estimated to be as much as £7 per pig in January. Forecasts suggest some easing in the feed costs for the remainder of this year, particularly after the harvest, indicating prospects of positive margins. However, this is weather dependent and assumes that pig prices will maintain their current level or even strengthen further, based on the expected shortage of EU pig production.

Little Sign of Tighter EU Supplies in January

According to latest figures from Eurostat, the expected tightening of pig supplies across the EU was not readily apparent in January. Slaughterings during the month were actually 4% higher than in January 2012 at 22.2 million head. However, this is partly because there was one extra working day in the month this year. Taking this into account, the true position was probably a modest decline. However, higher carcase weights meant that, even allowing for the extra day, pig meat production was around 1% higher than last January.

EU Pig Slaughtering Trends

Source: Eurostat

Most major producers slaughtered more pigs in January than a year earlier, with Belgium, Germany and Italy among countries with higher throughputs even accounting for the extra day. In contrast, Danish slaughterings were 7% down on a year earlier, as further increases in weaner exports continued to hit production. Supplies were also tight in France, with only a 1% year-on-year increase in throughputs, effectively a 3% decline.

Early figures for February again provide little sign of tightening supplies, with slaughterings down over 2% but an extra working day meaning the underlying position may actually have been a small increase.

UK Pig Prices

The EU-spec DAPP jumped up over a penny in the week ended 20 April, reaching 160.71p per kg. The DAPP has been gradually increasing for the past few weeks but for the latest week, the rise accelerated as supplies are beginning to tighten. The latest pig price remained 14p above last year’s level, although there was a similar week on week uplift during the equivalent week in 2012. Throughputs for week ended 20 April totalled 156,300 head. This was unchanged from the previous week but represented a 2% decline year on year. Carcase weights remain high, having averaged 79.50kg, in line with the week before but over a kilo up on the year.

GB Finished Pig Prices(DAPP)

AHDB Market Intelligence

The weaner market moved up again this week, hitting a new mark at £49.17 per head for the week ended 27 April. This was a 20p change on the week and the annual change increased this week to almost £4 per head. The weaner market has continued to strengthen recently due to slightly lower feed costs and the increasing DAPP.

For the week ended 13 April, sow prices edged up marginally after the big fall in the previous week. At 104.23p per kg, the annual drop remained large at 18p per kg. This reflects the stable prices on EU markets which have led to a subdued export trade. The number of sows culled during the week totalled 4,200 head.

Small Decline in March Throughputs

UK clean pig slaughtering in March 2013 totalled 767,000 head. This was almost in line with the same month last year, being less than 4,000 down on the year. The Easter period is likely to have affected the lower kill with a short week for the Bank Holiday at the end of the month; Easter was into April last year. The Scottish pig kill recorded a decline by almost a half. This reduction reflected the increased number of Scottish pigs sent to slaughter in England; throughputs in English and Welsh abattoirs totalled 622,000 head, up 4% on the year. Throughputs in Northern Ireland were 4% lower compared with March 2012.

Average Weekly UK Clean Pig Slaughter

Source: DEFRA

Adult pig slaughterings were 1% down on the year at 20,500 head. This was close to the kill figure from the previous month and the small year-on-year decline was again likely due to the earlier Easter. Nevertheless, replacement rates remain relatively high, despite the decline in sow prices compared with last year. UK clean pig carcase weights averaged 79.2kg, a marginal fall on the month but nearly half a kilo up on a year earlier. As a result, UK pig meat production was only marginally lower than March 2012 at 63,700 tonnes.

EU Exports Remain Subdued

As in January, EU pork exports were subdued in February and were 9% lower than in the same month last year. The slow start to the year has been a key factor in limiting the normal seasonal rise in pig prices, although consumer demand in the EU has also played a part. The situation would have been even worse but for a near doubling of shipments to China, indicating demand for imported pork remains strong despite increased production there. Demand was lower on most other major markets, notably from the countries of the former Soviet Union, where production was higher and prices lower. One interesting growth market was Croatia, with shipments up 7% in advance of its accession to the EU in July; it accounted for 3% of EU exports.

EU Pig Meat Exports

Source: Eurostat, GTIS

Pig offal exports were also subdued in February after a more positive January. Shipments were down by a similar proportion to pork. Volumes sent to China/Hong Kong declined as increased exports to the mainland failed to offset the fall to Hong Kong. Shipments to the significant secondary markets of Russia, the Philippines and Ukraine also fell but exports to Africa were up by 15%, increasing that continent’s share from 5% to 7%.

Feed Market Update

Wheat futures prices declined further over the last week, closing on Tuesday at £193.05, the lowest level for the May 2013 contract since July 2012. Markets are currently reacting to improving US weather conditions rather than crop condition or planting progress. Domestically, warmer weather has allowed farmers to finish planting the majority of spring crops and enabled fairly rapid growth of crops. Soyabean prices have not fallen in line with cereals prices due to a short term supply squeeze in South America. The export of soyabeans from South America is still delayed and most US supplies are now committed. This tight supply situation has also led to an increase in delivered prices in the UK.

EU Takes Larger Share of Chinese Imports

In the first quarter of 2013, China imported 10% less pork than in the same period last year, largely due to a 70% decline in the amount of US pork shipped. This was mainly the result of China imposing new requirements that all pork imports must be independently certified to be free of Ractopamine. In the first quarter of last year, the US accounted for over half of Chinese pork imports so this decline left a significant gap in the market. This gap has largely been filled by EU supplies which were up by two-thirds and accounted for 67% of imports during the quarter, compared with 36% a year earlier. All EU exporters benefitted, with the exception of Ireland. Shipments from the UK during the quarter totalled 4,800 tonnes, a 4% market share.

Chinese Pig Meat Imports, January-March

Source: China Customs, GTIS

There was a similar pattern for offal exports, with US shipments falling by nearly 40% year on year and volumes from the EU rising by nearly three-quarters. The US remained the largest country supplier, however, although the EU accounted for just over half of the total. Shipments from the UK totalled 3,200 tonnes, a 1.5% market share.

Growth in Freedom Food Pork

McDonald’s has become the first restaurant chain in the UK to commit to sourcing all its pork from farms approved under the RSPCA’s Freedom Food scheme. According to the animal welfare organisation, the amount of pork carrying the logo has risen by 200% since 2009, with 420 different Freedom Food labelled pork products available in UK supermarkets. The increase in demand has been met with a surge in the number of pigs reared under the scheme, with growth of almost 50% over the last three years. In 2011, 2.7 million pigs were reared under the scheme.

April 2013

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