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AHDB Pork UK Pig Meat Market Update

09 July 2013

BPEX UK Pig Meat Market Update - August 2013BPEX UK Pig Meat Market Update - August 2013

British Pig Executive Monthly UK Pig Meat Market Update

UK Prices

The sustained rise in finished pig prices which began in March continued throughout June before slowing into July. For the second consecutive month, the average EU-spec DAPP for June was a new record, reaching 166.79p per kg. This was nearly three pence higher than in May and 17p higher than the average for June 2012. Price rises have largely been driven by strong demand for British pigs, in part due to an increased retailer preference for domestic pig meat as they sought to shorten supply chains. This came despite EU prices being significantly below the level of the domestic market and pig supplies being at similar levels to last year. The upward momentum began to ease into July and by the middle of the month they had stabilised. For week ended 20 July, the EU-spec DAPP stood at 168.81p per kg, fractionally lower than the previous week but still at an unprecedented level.

As has been the case all year, carcase weights continued to track well above year earlier levels during June and July. The monthly average for June was 78.82kg, slightly lower than the previous month but almost a kilo heavier than in June 2012. Weights have remained at a similar level into July but the hot weather during the month may be suppressing growth rates. This could delay the seasonal increase in weights which normally occurs during August and September.

Weaner prices have generally followed the direction of the finished pig market, rising steadily from March until early July. The average price for June was £51.77 per head, the highest monthly figure since July 2010. Reducing feed prices were also a factor in the upward trend, with finishers anticipating lower costs for raising pigs to slaughter weight. By mid-July, the price had increased further before stabilising at just under £54 per head, around £13 higher than a year earlier and £7 up on the start of the year.

As usual, the GB cull sow market was more dependent on trends in the EU pig market than the domestic situation. With better weather on the continent stimulating demand, prices began to move upwards during June and accelerated into July. The monthly average price for June was 102.62p per kg, nearly five pence higher than the previous month but still 13p lower than a year earlier. However, last year prices were falling at this time of year. By week ended 20 July, the price had risen above its level a year earlier for the first time in 2013, standing at 112.61p per kg, its highest level since November 2012.

EU Prices

With demand having been subdued for much of the year, EU pig prices have shown little sign of life. However, that began to change in June as improved weather conditions stimulated demand in northern Europe, as did the approaching holiday season in the south. At the same time, export markets were improving, notably Russia where EU pork replaced supplies from the Americas. The average reference price in June was €172.06 per 100kg, nearly seven euros up on May and four euros higher than in June 2012. Into July, there were reports that supplies were beginning to tighten while demand remained strong, which meant that prices increased rapidly. By week ended 20 July, the EU average reference price had risen to €182.09 per 100kg, its highest level since November and nearly 14 euros up on a year earlier. With prices starting to approach similar levels to last autumn, the impact on consumer demand remains to be seen.

Prices have increased in recent weeks across all major producing Member States. In Germany they increased by seven euros between May and June, with similar rises in neighbouring Belgium, the Netherlands and Poland. The largest rises were in French and Italian quotes, which increased by as much as ten euros. Growth was somewhat slower in Denmark, up by only three euros on the month. These trends generally continued into July, with prices increasing everywhere but by less in Denmark and more in Italy.

Although the UK reference price increased between May and June, the rise was smaller than elsewhere, so the UK’s premium fell from over €22 in May to €18 in June. With UK prices stabilising, the gap was eroded further and by week ended 20 July it stood at just €9, its lowest level since March.

Despite lower feed prices and the strengthening finished pig market, EU weaner prices have remained subdued. The average price in June was €45.53, over a euro lower than in May. It was also down by a similar amount from June 2012 and represented the lowest monthly average since September 2012. Prices had only increased marginally by mid-July, with the average for the week ended 20 July standing at €45.81 per head. The market has been a little firmer in Denmark but price falls have been recorded in most other major producers. The biggest decline was in Italy, where prices had fallen by six euros per head since the end of May.

As usual, cull sow prices in the EU broadly followed the trend of the finished pig market, although the recovery of prices was less dramatic. In Germany, the price for an M1 Grade sow in June averaged €1.31 per kg, two cents higher than in May, although still eight cents lower than a year earlier. Prices continued to rise and by week ended 20 July had reached €1.38. This was the highest level so far this year and three cents up on a year earlier. Prices elsewhere followed a broadly similar trend.

UK Slaughterings and Pig Meat Supplies

UK pig supplies remained relatively tight in June, with slaughterings up less than one per cent on June 2012 at 743,200 head. This means that slaughterings in the second quarter were marginally lower than a year earlier, the first such fall since the third quarter of 2009. With more pigs continuing to cross the border from Scotland into England for slaughter, Scottish throughputs were down by more than half, while those in England were up six per cent. Northern Ireland killed one per cent fewer pigs in June, mainly due to lower imports from the Republic of Ireland. This trend has been apparent for most of 2013, with the number of imported pigs slaughtered in Northern Ireland so far this year down four per cent on a year earlier.

The number of sows and boars culled in June was six per cent higher than a year earlier, at 20,200 head. The recent increases in the sow price indicate higher export demand, encouraging a rise in throughputs. In the first half of the year, two per cent more sows were culled compared with the same period in 2012. The increase came despite relatively weaker sow prices this year, indicating producers continue to prioritise herd productivity.

As has been the case all year, clean pig carcase weights were higher than in June 2012, averaging 78.2kg. This is the highest average weight ever recorded for June. Since the recent decline in feed prices, producers have been willing to sell heavier pigs. The net result was that pig meat production in June was one per cent higher than a year earlier at 61,000 tonnes. Cumulative production for the first half of the year was up by a similar proportion at 408,000 tonnes.

Based on the DAPP sample, estimated GB clean pig slaughterings in the first three weeks of July were one per cent lower than the same period in 2012, meaning the year to date figures were only marginally higher on the year. Supplies in the coming months are still expected to remain tighter than they were last year, given the fall in the breeding herd during the second half of last year.

UK pork imports almost levelled in May, with a marginal decline compared with a year earlier. Imports from Denmark were down four per cent, due to lower availability from the country. However, it remained the primary supplier to the UK. While Ireland and France are smaller suppliers, imports were down by more than a quarter from both countries. Despite the falls, the UK market was somewhat balanced by the notable increases from Germany (up 12 per cent) and Netherlands (up 29 per cent). The unit price of imports was up by eight per cent at £2,070 per tonne. This was despite cheaper frozen shipments being up by more than a quarter, while fresh volumes were down seven per cent As a result, the value of pork imports in May was seven per cent up at £62.1 million.

Lower shipments from the Netherlands, Denmark and Germany meant that UK cured pig meat imports fell to 18,900 tonnes. This was 13 per cent lower compared with the same month a year earlier. The three main countries account for over 90 per cent of the overall trade. As a result, higher shipments from the other EU Member States failed to offset the decline from the main markets. Both sausages and other processed products also recorded a 13 per cent year-on-year decline, with Germany and the Netherlands again among the suppliers affected.

UK pork exports continued to grow in May, as supplies totalled 13,600 tonnes. This was 17 per cent higher than the same month in 2012. While still taking significant volumes, China stepped down to fifth place in May, having been the largest market the previous month. Increased exports were partly due to stronger demand from Germany, with shipments a fifth higher than a year earlier. Several other EU Member States reduced imports, including Ireland and the Netherlands but overall exports to the EU were up seven per cent. As for imports, frozen shipments rose particularly fast, being up by more than half year on year, while fresh/chilled volumes were little changed. The average price paid per unit exported came down five per cent but increased volumes meant exports were valued 11 per cent above a year earlier at £16.1 million.

Exports of cured pig meat in May increased from the low levels of the past 12 months, while sausage exports grew at a slower rate. In contrast, other processed shipments fell and pig offal exports slowed marginally. Strong offal demand from Asian markets was offset by a large decline in shipments to other EU Member States including the Netherlands and Ireland. In addition, South Africa emerged as a new market and contributed five per cent of total UK exports.

Feed Prices

The UK wheat November 2013 futures price closed at £162.75 per tonne on Thursday 25 July, down around five pounds from the settlement price a month earlier. The Chicago maize price (the main determinant of global feed grain prices) closed at $188.48 per tonne for the December 2013 contract, down from $214.37 a month ago and the lowest closing price since November 2010. Reports of favourable US weather have led to recent price declines and weather forecasts still point to ideal weather as the crop progresses and less weather risk is likely to be seen in the market.

AHDB/HGCA published the 2013 GB planting and variety survey results on 22 July. As a result of the poor planting and growing conditions this year, farmers were asked to submit their intended harvest area rather than planted area. The results showed that total GB area dedicated to barley and oats has increased, while wheat and oilseed rape areas reduced, reflecting the poor planting conditions of last autumn and a switch to spring cropping. The larger area and, thus, a larger crop will most likely see barley competitively priced into feed rations relative to other raw materials. The new crop discount between wheat and barley has already grown to over £20 per tonne to attract maximum use in feed rations, although competition from imported maize is still one to watch.

USDA, in its July report, put the global wheat crop at 698Mt, 43Mt above 2012/13, while global maize production is now estimated at 960Mt, up from 855Mt in 2012/13. Global 2013/14 wheat end-season stocks are seen lower than last season while maize stocks are expected to recover by 27Mt. Nevertheless, with maize stocks still well below the more comfortable levels seen in 2008/09, prices are likely to remain volatile on any news linked to production shortfalls.

The Chicago soyameal futures price (December 2013) closed at $402.9 per tonne on 25 July, down from $423.9 a month earlier. The nearby price has also declined two per cent during the month. The UK Hi-pro soyameal price (ex-store East coast) as at Friday 26 July was £432 per tonne for July delivery, up £5 on the week. Favourable US weather has also recently led to lower soyabeans prices and thus, soya meal prices. It is noteworthy that the key stage for the soyabean growth is expected in August, so prices can still move in either direction.

According to the latest HMRC data, the largest amount of soya meal and cake so far this season was imported in May at 242.5Kt. The total of 1.5Mt for the season to date (July-May) was still lower than the 1.6Mt imported in July 2011-May 2012. Demand for soya meal in feed production continues to lead to price increases relative to rape meal. Although rape meal prices have also increased, there has been a recent decline on the good rapeseed crop conditions and prospects seen globally. If these trends continue, rape meal may become a more attractive option to replace soya meal in rations subject to maintaining the right nutritional balance.

Latest AHDB/BPEX provisional estimates show that the cost of pig production fell further in July. This was largely due to the easing of spot feed prices as prospects for this year’s harvest still look positive. Average costs in July were estimated to be just under 159p per kg. This is the lowest level since June 2012 and around five pence lower than the month before. Costs have fallen by over 14p per kg since January and are now below the level a year earlier for the first time since feed prices began rising last summer.

With the average pig price standing at over 168p per kg in July, producer margins are back in the black, having been in negative territory since late 2010. However, while this reflects the trading position in the latest month, it is worth remembering that pigs being sold during the month will have been fed through a period when costs were typically much higher. In addition, some producers will have bought feed ahead earlier in the year and they will not yet have benefitted from the lower spot prices on which the estimates are based.


In the 12 weeks to 7 July, consumer spending on pork increased one per cent compared with the same period last year, according to the latest figures from Kantar Worldpanel. This growth continued to be driven by price rises, as the amount purchased fell three per cent on the year. Pork marinades were the main bright spot, making up 14 per cent of all pork sales by volume. The largest gains were for ribs, likely driven by the barbecue season. Most other cuts recorded a decline in purchases compared to last year.

Over the same period, spending on bacon was one per cent below last year, as the amount purchased declined five per cent. Much higher prices meant expenditure on sausages was up by 10 per cent, despite volume purchases falling, although premium sausages again performed well. Sliced cooked ham has shown good growth, with expenditure up four per cent and the amount purchased five per cent ahead of last year due to shoppers buying more often and buying more per trip.

After the horsemeat scandal at the start of 2013, consumers’ trust in food and food retailers fell noticeably. The decline in trust appeared to be industry wide; consumer concerns were not limited to the affected items. Product safety and quality were, understandably, the key areas of concern. However in the last few months, despite some after-effects still being apparent for certain products, consumer trust in the industry appears to be being slowly regained.

IGD reported that, after the scandal broke, only around half of shoppers agreed that food companies in Britain could be trusted to provide safe products and only 62 per cent felt they could be trusted to provide food of a reasonable quality. Mintel research from March indicated that only a third of consumers thought food manufacturers and supermarkets were aware of where their ingredients originate from, highlighting consumers’ distrust at the peak of the media coverage.

Consumers have been voting with their baskets and many are thinking more about what and where they purchase their food. Shoppers are continuing to switch away from processed meat products and buying fresh cuts instead. Sales of frozen ready meals, in particular, are still being impacted and frozen burger sales remain below this time last year. Consumers are also looking more closely at labels. IGD’s research in April indicated that over one in four consumers agree that products meeting quality assurance standards are worth paying more for, a 10 point jump since April 2012. Mintel has reported a rise in the number of consumers who claim that ‘British’, ‘regional’ and ‘local origin’ are factors when buying food.

According to Mintel, nearly half of consumers agreed that if food contains British ingredients they would be more likely to trust the product. Manufacturing details on pack and animal welfare certification, such as the Red Tractor scheme, scored similarly on encouraging trust. Although traceability has increased in importance, only 14% say it influences their choice, implying that shoppers expect retailers and brands to shoulder that responsibility.

These trust-boosting factors have featured heavily in retailers’ recent communications to shoppers. Many have been advertising their dedication to British produce (particularly meat) and we are already seeing more commitment towards British sourcing. However, it is important to remember that consumers still regard price as the key consideration in their product choice.

Research shows that, although trust in the industry is still lower than the end of 2012, confidence is beginning to be regained. To ensure these gains continue, retailers need to maintain focus on factors that encourage trust and make origin and manufacturing details more readily available.

August 2013

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