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AHDB Pig Market Weekly

10 June 2013

AHDB Pig Market Weekly - 6 June 2013AHDB Pig Market Weekly - 6 June 2013


Data Table Footnote

Year-on-year comparison for GB DAPP, GB clean pig slaughterings, average GB carcase weight and average probe is against week ended 26 May 2012 as no DAPP was issued for week ended 2 June because of the double Bank Holiday.

EU Pig Prices Edging Down

The EU pig market has fallen back since mid-April after having been stable in the previous eight weeks. By the second half of May the EU reference price had fallen by over €7 per 100 kg and in the week ended 25 May averaged €165.1 per 100kg to become little more than a year earlier. Prices would normally have been expected to strengthen during this time of the year. However, the sluggish EU economy coupled with unfavourable weather has weakened consumer demand on many markets. In addition, the EU export market has been adversely affected by reduced demand from Russia and South Korea. Once weather conditions improve, and hence the barbecue season starts, and stocks return to more normal levels then some upturn in the market can be expected.

EU Average Pig Refercence Price

EU Commission

The EU average was partly pulled down by the decline in prices reported in the Netherlands. Prices for the last week of May show that Dutch producers received almost €10 per 100 kg less for finished pigs compared with prices in mid-April. Prices have generally fallen by a somewhat smaller amount in the remainder of North West Europe including Denmark and Germany. Prices in the three countries have even shown some stability in the second half of May. Spanish prices have come down from their high of €195 per 100 kg in late March but still average €185 and remain one of the highest in the EU. In Italy after a sharp fall between mid-February and late April in response to a marked fall in consumer demand the market is showing some signs of stability. At a time when the EU reference price has fallen the UK price in Euro terms has risen steadily during May and meant that the gap increased notably to €23 per 100 kg. This is a large change from the situation in early March when the gap averaged less than €2.

Danish Pig Farm Numbers in Continuous Decline

Data from Danmarks Statistik indicate an ongoing decline in the number of pig farms in Denmark. The results of the summer 2012 survey show that the total number amounted to 4,181 a reduction of 10% compared with summer 2011 and as much as 64% compared with 10 years previously. Over the 10 year period there is evidence of some increase in specialisation of pig production as combined breeding and finishing units only accounted for 39% of total pig farms in 2012 compared with 44% in 2002. This mainly reflects a small growth in the proportion of specialist finishing units and other units. The latter are defined as those containing neither sows nor finishing pigs and so would include specialised weaner units. The proportion of breeding units has only changed marginally and accounted for 11% of the total number of holdings in 2012.

Number of Danish Pig Farms

Source: Denmarks Statistik

In 2012 total Danish pig output (slaughterings plus live exports) amounted to 29.0 million head a rise of 20% compared with 2002. This implies that output per farm averaged nearly 6,950 head in 2012 compared with 2,050 in 2002.

UK Pig Price

As expected, the EU-Spec DAPP continued to increase for the 13 consecutive week, reaching 165.05p per kg for the week ended 1 June. This was marginally higher than the week earlier but the annual year on year increase rose further to almost 16p. For the latest week, supplies were somewhat tighter given that Monday was a Bank Holiday with the weekly throughput amounting to 148,600 head. This was just over 10,000 lower compared with the same week in 2012. While supply was tight demand remained subdued a situation that also applied on the continent with markets awaiting an improvement in the weather. Carcase weights for this week were stand-on at 78.9kg and slightly up compared with the week ended 26 May 2012 (no DAPP was issued for the week ended 2 June 2012 because of the double Bank Holiday).
The weaner market reached another record high with the price for a 30kg weaner hitting £51.06 per head for the week ending 8 June. This was around £1 higher compared with the week earlier. Higher finished pig prices this year is the main reason for the steady confidence in the weaner market. The price was almost £8 per head above the 2012 level for the same period.

The weekly sow price dipped very slightly for the week ended 25 May to 98.17p per kg. The annual difference remained at 18p again this week. Sow prices across Europe were largely unchanged given ongoing lower demand from continental manufacturers of processed pig meat. The number of sows culled during the week totalled 5,700 head which was higher than both the previous week and a year earlier.

Falling Irish Pork Exports

In the first quarter of 2013 Irish pork exports fell by 3,700 tonnes or 11 per cent compared with a year earlier. Irish production was down by 6% or 4,000 tonnes while export demand was also subdued partly since pig prices have become much higher in the EU compared with a year earlier. Shipments though to Ireland’s main market, the UK, actually increased by 7% in spite of increased UK production and accounted for almost 40% of Irish trade. Demand from China and Germany continued to grow in contrast to reductions for Russia and Denmark. Russia reduced its imports from Ireland by almost one half and so its share of Irish trade declined to only 8% in the first quarter of 2013 compared with 14% a year earlier. Similarly, exports to Denmark were down by 25% year on year.

Irish Pork Exports, January-March

Source: Central Statistics Office, GTIS

The Irish unit export price rose by 12% year on year in the first quarter of 2013 and the value of pork exports totalled €68.7m marginally down compared with the same period in 2012.

Feed Market Update

UK LIFFE wheat (Nov-13) futures prices have risen and on 4 June 2013 the contract price settled at £179/t. The AHDB/HGCA/ADAS crop development report for the UK was released on 30 May stating that while improved growing conditions have allowed UK wheat crops to catch up development was still seen as being 10-14 days behind normal as at the end of May. Heavy rains in the US Midwest are hindering spring wheat planting progress and there are also concerns surrounding winter wheat yields. However, beneficial rain was reported for Australia and the Black Sea region. In the case of maize, prices are again being influenced by wet weather delaying plantings in the US. Global and UK soyabean prices have again strengthened over the week as the near term tightness in supplies continues. The situation is also not being helped by port worker strikes in Argentina and rains delaying plantings in the US Midwest.

Spanish Pork Exports Well Down

Pork exports are an important feature of the Spanish pig meat industry but in the first quarter of 2013 they were down 17% on a year earlier. This was partly a reflection of lower production which over the same period was down 3% or 30,000 tonnes compared with January-March 2012. In addition there was lower demand from Spain’s two main markets of France and Italy with shipments falling by 13% and 16% respectively. Spanish pork is widely used in the French further processing industry but consumer demand for pig meat in France has fallen so far in 2013 in response to the deteriorating economic situation there. The consumer demand situation has been even more adverse in Italy especially for some processed products. Exports to Germany were 32% down partly given increased domestic production although this market only accounts for 6% of Spanish pork trade. Portugal was the only main EU member state that increased imports from Spain with trade up by 17% which may partly reflect some switch from live pigs.

Spanish Pork Exports, January-March

Source: Agencia Tributaria, GTIS

For non-EU markets the fact that Russia has been reducing its shipments from the EU in general also contributed to a fall of 21% in Spanish shipments to this market. In contrast while China has increased its pork imports from the EU so far in 2013 shipments from Spain were down 10%. The effect of a higher export price, which in turn was mainly due to higher pig prices in the EU as a whole, was more than offset by the lower volumes and hence the total value of Spanish exports was down 9% on a year earlier to €558 million.

World’s Largest Pig Meat Processor Braced for Chinese Takeover

Shuanghui International, China’s largest pig processing company, has agreed to buy Smithfield Foods in a deal worth US$7.1 billion. However, the deal is subject to approval from Smithfield shareholders and US regulators and is not expected to be completed until the second half of 2013. The deal is likely to face strong opposition from Congress which has already blocked a series of Chinese takeovers in other industry sectors. Smithfield Foods, based in the US, owns approximately 851,000 sows and markets about 15.8 million pigs a year. Operations include 460 company-owned farms plus contractual business relationships with 2,100 family farms across 12 states.

The proposed takeover is likely to give the US pig meat industry better access to the Chinese pig meat market which is the largest and fastest growing in the world. Consumption of pig meat in China has risen by almost 30% in the last ten years and amounted to 52.7 million tonnes in 2012. Chinese consumers spend about $183 billion a year on pork preferring fifth quarter products such as pig head, feet and offal that are not widely consumed in the US. At the same time acquiring Smithfield could give China’s biggest pork producer access to more advanced production technology. It could also improve pork’s food safety image amongst consumers which has become an important issue recently.

June 2013

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