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AHDB Pig Market Weekly

26 July 2013

AHDB Pig Market Weekly - 25 July 2013AHDB Pig Market Weekly - 25 July 2013

UK pork exports continued to grow again in May, as supplies totalled 13,600 tonnes. This was 17% 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.


Strong German demand boosts UK pork exports

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. 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.

Pork imports almost levelled in May, with a marginal decline compared with a year earlier. Imports from Denmark were down 4%, but the country 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. However, the market was somewhat balanced by the notable increases from Germany (up 12%) and the Netherlands (up 29%). Lower shipments from the Netherlands, Denmark and Germany meant cured meat imports were 13% lower compared with the same month a year earlier. Both sausages and other processed products also recorded 13% year-on-year declines.

EU takes higher share of Chinese pork market

Chinese pork imports remained stable in the first half of this year, with a total of 272,300 tonnes. However, the US lost its position as the primary supplier to Germany, whose imports grew by 81%. In contrast, the US which supplied almost half of all pork imports to China last year, reduced its share of trade to 18% as volumes came down by over 60%. The large change in US supplies was a result of Chinese requirements that its pork products are verified to be Ractopamine free. This created an opportunity for EU exporters and as a result trade improved significantly compared with a year earlier. As well as Germany, Denmark, Poland, France and the UK were amongst the other beneficiaries. The UK’s market share during the period was 4%, with shipments totalling nearly 10,000 tonnes. Imports from Canada also strengthened. The average price paid came down by 2% and the value of total pork imports also fell by 2% to RMB 3.2 billion.

Offal imports were down 4% in the first six months of this year. By country of origin, the trends were similar to those for pork, with growth from the EU reaching 61%. The main beneficiaries were the same as for pork with the addition of Spain, whose pork shipments were slightly lower. However, offal imports from the US were half the previous year’s level. This large decline from China’s main market offset the increases from the EU. Overall, the value of offal imports amounted to RMB 4.6 billion, up 8% on the year.

UK pig price

The EU-spec DAPP stabilised in the week ended 20 July at 168.81p per kg. For the first time since the start of March, the price fell very slightly, by just 0.03p, indicating that the market is well balanced. This comes despite firm demand for some products, particularly those for the barbecue, given the hot temperatures as of late. However, the weather also means that demand for loins and legs has reportedly been more subdued, reducing the price processors are willing to pay. Nevertheless, compared with the same week a year ago, pig prices were 18p higher. Throughputs for the week stood at 160,700 head, similar to a year earlier but, at 78.69kg, carcase weights were again a kilo higher year on year.

The relative stability in finished pig prices meant that the weaner market was also balanced. For the week ending 27 July, the price for an average 30kg weaner edged up to £53.58 per head. While the week on week change was minimal, the annual difference reached above £13 per weaner sold.

The sow market picked up again for the week ended 13 July. At 109.97p per kg, producers received nearly 2p more compared with the week earlier. This reflects the recovery of pig prices on the continent as the improved weather has sparked increased demand. The recent rises in the cull sow market mean that prices are catching up to year earlier levels and they are now only 1p per kg below the same week in 2012. The number of sows culled totalled 4,800 head, down 10 per cent on the year.

Soya prices remain firm but outlook bearish

The Hi pro soyameal (Ex-store, East Coast) price for delivery in July was £427/t as at 12 July, down from £448.50 a year ago. Despite this decrease, prices have been relatively firm in 2013, even with a record South America crop. Earlier this year, Brazil struggled to export at the pace required by importing countries due to challenging transport logistics. Argentinian farmers, on the other hand, kept soyabean sales to a minimum due to the country’s low official exchange rate. This meant that dependence on the US crop remained high into the spring, leading to a sharp increase in prices for nearby delivery. China, a top consumer of soyabeans, also saw its production drop to a 20-year low in 2012/13 so its increased demand helped to support prices.

More recently, the tight South American supplies have eased, with Brazil recording extraordinary exports in April and May. Attention has now shifted to the US new crop, as the proportion of crops seen in good/excellent condition declined due to warm weather in parts of the country. Furthermore, there are concerns that yield potential will be damaged if the hot and dry weather continues and the market in the near term is expected to be weather driven. With the export delays now easing off in Brazil, the outlook for the 2013/14 season in the medium term is bearish. It is likely that Brazil will stay active in the export market into the autumn when the US crop becomes available, which is reflected in only a modest rise in futures prices for delivery later in the year.

Small increase in June pig slaughterings

UK pig supplies remained relatively tight in June, with slaughterings up less than 1% on June 2012 at 743,200 head. Throughputs last June were lower than the previous year, so this year’s figure was little changed from June 2011. 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 6%. Northern Ireland killed 1% 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 4% on a year earlier.

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. Sow and adult boar slaughterings were 6% higher than last June at 20,200 head. The net result was that pig meat production in June was 1% 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.

Positive prospects for global pork market

In its latest quarterly report on the global pork market, Rabobank expects a positive landscape for the pork industry in the remainder of this year and into next. Supply growth is set to be limited and demand in China will increase in the run up to the festival season. High beef and poultry prices will also be supportive. However, with stock levels relatively high following a disappointing first half of the year and demand in the developed world still subdued by the weak economy, price increases may be limited.

Global prices rebounded in the second half of quarter 2, led by a recovery in China. This was supported by the outbreak of H7N9 avian influenza, which has resulted in consumers switching from poultry to pork. In the US, prices have recovered from the loss of key export markets, as demand has increased and supplies have been tighter than expected. The report also comments on the proposed takeover of Smithfield Foods by Shuanghui International, which shows the increasing importance of global trade for the pork industry. In order to secure supplies, it is thought that other importers may look to follow a similar route.

For more information, click here.

Feed market update

The UK feed wheat Nov-13 futures price settled at £164.50/t on Tuesday 23 July, down 2%, or £4, from last week. The Chicago maize price also closed lower over the week. In order for the US maize price fall to be reversed a fairly major weather event is needed, otherwise there is potential for the price to continue to drift lower. The 2013 AHDB/HGCA planting survey results showed larger spring crop areas than expected after a difficult planting season. With a record GB spring barley area, a tighter supply of wheat and a surplus of barley is likely to encourage further use of barley, where possible, in feed rations.

Dec-13 CBOT soyameal futures price closed lower over the week on 23 July at $419.76/t, down $8.60. Hi pro soyameal (Ex-store, East Coast) for August movement gained £21/t last week to £427/t due to tight nearby stocks and continuing strong demand. However, protein prices are expected to fall once the US harvest gets underway in September and October.

To read more about the latest developments in the feed market click here.

Russia and China take more EU pork

After a slow start to 2013, EU pork exports were up year-on-year in May, for the second month running. Shipments were 4% higher than in May 2012, totalling 135,000 tonnes. The main reason for the recovery in exports in April and May was the improved Russian market. Having been down 18% in the first quarter of the year, shipments to Russia were up 27% on the year in April and 21% in May. This came despite higher domestic production, as restrictions placed on pork from other suppliers, notably from North and South America, left a gap in the Russian market. As has been the case all year, the other major growth market was China, with volumes to Hong Kong also higher in May. Having been up earlier in the year, shipments to Japan were lower in May, while several other important markets also took less EU pork.

Offal exports from the EU were also stronger in May than earlier in the year. Shipments were up 17% year on year, on the back of increased volumes sent to the main market, China/Hong Kong. Unlike for pork, the Russian market remained subdued. The Philippines continued to re-emerge as an important secondary market for EU offal, accounting for nearly 5% of shipments in May.

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