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AHDB Pig Market Weekly

01 August 2013

AHDB Pig Market Weekly - 1 August 2013AHDB Pig Market Weekly - 1 August 2013

Latest AHDB/BPEX forecasts for UK pig meat supplies indicate that the fall in pig slaughterings this year will be smaller than previously thought.


Little change forecast for UK slaughterings and production

For the year as a whole, clean pig throughputs are expected to be just over 10 million head, still lower than last year but only marginally. Sow slaughterings are likely to be back more significantly, particularly in the second half of the year when they were inflated last year as a result of high feed prices. However, these declines will be offset by higher clean pig carcase weights, so pig meat production is set to be fractionally higher than last year at 828,000 tonnes. The upward revision of the forecasts is largely the result of better-than-expected improvements in sow productivity. With some recovery in the herd forecast, slaughterings and production should resume their upward trend in 2014.

With tight supplies elsewhere in the EU and increased retailer preference for UK pig meat, imports so far this year have been lower than a year earlier. This trend is expected to continue for the remainder of the year, with volumes stabilising next year. UK exports have been strong so far in 2013, buoyed by demand from China but growth may slow in the remainder of the year with supplies tighter. Nevertheless, shipments for the year as a whole should be up significantly, a trend expected to continue into 2014. The net result is likely to be lower supplies for domestic consumption, a trend apparent in figures for retail sales for the year to date.

More details on the outlook for UK pig meat supplies can be found in the latest edition of Pig Market Trends, which can be downloaded by clicking here.

Production costs fall further in July

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.

UK pig prices

For the week ended 27 July, the EU-spec DAPP came down to 168.25p per kg. Finished pig prices have started to experience some downward pressure, with a week-on-week fall of 0.56p, as recent price rises started to hit consumer demand. This meant that the difference between the latest price and the same period last year narrowed to just under 18p. The recent turn in the weather will have dampened demand for the barbecue season but it could help sales of some other products. Estimated slaughterings were slightly up on a year earlier, at 163,400 head. Carcase weights increased slightly during the week, to 78.82kg but the hot weather appears to be delaying the seasonal increase in weights which would normally be seen at this time of year. Nevertheless, this week’s average was more than a kilo up on a year earlier.

For the eighth consecutive week, cull sow prices rose, to 112.61p per kg for the week ended 20 July. Fuelled by a more robust market across the continent, this was almost 3p up on the week. The recent increases have taken the sow market above year earlier levels for the first time since November last year, with the annual change for the week up 4p.

With the finished pig market easing slightly, the weaner price was again little changed. The latest quote, for the week ending 3 August, fell to £53.54 per head. This was four pence lower than a week earlier but the year-on-year increase remains large, at nearly £14 per head.

Pork marinades up as the summer arrives

In the 12 weeks to 7 July, consumer spending on pork increased 1% compared with the same period last year, according to the latest figures from Kantar Worldpanel. This growth continues to be driven by price rises (up 4%), as the amount purchased fell 3% on the year. Pork marinades were the main bright spot, making up 14% 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 volume purchases compared to last year.

Over the same period, spending on bacon was 1% below last year, as the amount purchased declined 5%. Fewer households purchased and those that did shopped less frequently. Expenditure on sausages was up by 10%, despite volume purchases falling 4%, although premium sausages again performed well. Sliced cooked ham has shown good growth, with expenditure up 4% and the amount purchased 5% ahead of last year, due to shoppers buying more often and buying more per trip.

In the most recent 4-week period, volume sales of pork declined 6%, resulting in a spending decrease of 2% compared to last year. Marinades were again the only cut to show volume growth. Bacon sales fell further behind last year as the amount purchased declined 10%. Spending on sausages again increased despite volume purchases declining but ham continued to perform better.

EU pig prices on the up

With demand having been subdued for much of the year, EU pig prices showed 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. Into July, tighter supplies meant that prices increased rapidly with demand remaining strong. By week ended 21 July, the EU average reference price had risen to €182.09 per 100kg. This was its highest level since November, up €18 since the low point in May and nearly €14 more than 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, the reference price had increased by €16 since mid-May, with similar rises in neighbouring Belgium, the Netherlands and Poland. There were even larger increases in Southern Europe, with the Italian reference price up by over €30 in six weeks and the Spanish quote moving above €200 per 100kg for the first time since 2001. Growth was somewhat slower in Denmark, up by only €8 since May and less than €3 in the last four weeks. Although the UK reference price remained firm through this period, upward movement was more limited so the UK’s premium over the EU average price fell from over €24 in mid-May to less than €10 in the latest week.

Feed market update

The Nov-13 UK feed wheat futures price closed on Tuesday two pounds lower over the week at £162.50/t. However, this represents an increase on Monday’s close as the UK price followed Chicago wheat prices higher on Tuesday. In a longer term context, this is a decline of more than £35/t since the Nov-13 price peaked last November. Global wheat prices have seen some support recently on strong export demand from Japan and Egypt plus concerns for the US wheat quality. The US weather continues to get the main attention as every day gets closer to the realisation of the estimated bumper crops. Some more weather risk is expected to be taken out of the market as more rain is forecast for the next two weeks.

The Hi-pro any origin soyameal (ex-store East coast) price as at Friday 26 July was £432/t for July delivery, up £5 on the week. The Chicago soyameal Dec-13 futures price closed at $401.10/t on Tuesday, down 4% from the week before. Rape meal prices have continued to decline due to improving global rapeseed crop conditions on top of the favourable US soyabean crop conditions. According to analysts Oil World, physical supplies of soyameal were still rather tight in the EU in July, keeping nearby delivery prices firm and above average. However, arrivals are expected to pick up in the coming weeks.

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

Most pig farms taking action to prevent disease

New figures from Defra show that 90% of farms with pigs are undertaking at least one practice to prevent animal disease. The most common of these, employed by 80% of farms, were measures to prevent disease being brought onto farm by visitors. This was more prevalent among pig farmers than those in other livestock sectors and was particularly common in the main pig producing regions of Yorkshire and East Anglia. Farms with pigs were also more likely than other livestock farms to be taking other measures, such as using strict stock replacement policies and separating new livestock from existing animals.

However, only just over half of pig farms had implemented a farm health plan in consultation with their vet, a lower proportion than for dairy or poultry farms. Similarly, at 40%, fewer farms had provided training in disease management than in the dairy or poultry meat sectors. Most livestock farms carrying out preventative measures were doing so for animal welfare or financial reasons. Overall, only a quarter cited the market or customer as a reason for doing so but for pig farms this factor was mentioned by well over half of farms.

The full report can be downloaded by clicking here.

June Pig Market Trends out now

The July edition of Pig Market Trends (PMT) was published on Tuesday. As well as the usual coverage of producer prices, slaughterings and production, trade, retail sales and prices, costs of production and other industry news, this month’s edition includes the latest outlook for UK pig supplies (see above).

Key messages this month include:

  • GB pig prices, already at record levels, continue to increase in June on strong demand for UK pig meat
  • Little annual change in UK slaughterings in June but carcase weights remain high
  • UK pork exports in May up on the year again on the back of strong demand from Germany
  • Pork imports in May similar to year earlier but cured and processed volumes lower
  • Trust in food retailers recovering from horsemeat revelations but shoppers more aware of quality standards
  • Cereals prices decline further as global weather remains favourable but soya expensive in short-term

DOWNLOAD REPORT:- Download this report here

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