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AHDB Pig Market Weekly

08 August 2013

AHDB Pig Market Weekly - 8 August 2013AHDB Pig Market Weekly - 8 August 2013

After the horsemeat scandal, consumers’ trust in food and food retailers fell noticeably. However in the last few months, it appears to be being slowly regained.


Retailers rebuilding consumer trust

IGD reported that, after the scandal broke, only around half of shoppers trusted British food companies to provide safe products and 62% trusted them to provide food of reasonable quality. Mintel research from March showed only a third of consumers thought food manufacturers and supermarkets knew where their ingredients originated from, highlighting consumers’ distrust at the peak of the media coverage.

Consumers have been voting with their baskets, continuing to switch away from processed meat products and buying fresh cuts instead; sales of frozen ready meals, in particular, are still being impacted. Consumers are also looking more closely at labels. IGD’s research in April indicated that over one in four were willing to pay more for products meeting quality assurance standards, a 10 point jump since April 2012.

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, scored similarly on encouraging trust. Although traceability has increased in importance, only 14% said it influences their choice, with shoppers expecting 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 and we are 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.

EU gains importance in the Russian market

Russian pork imports fell by 17% in the first half of 2013, with a total of 266,900 tonnes. This was partly due to higher domestic production, which led to lower pig prices and reduced demand for imported pork. Brazil regained its position as the leading supplier, providing a quarter more pork compared with the first six months of last year. However, this was mainly due to the restrictions placed on Brazilian plants in 2012 and the country is yet to catch up to the pre-ban volumes of 2011. This was partly because Brazil was affected by restrictions on imports resulting from Russian concerns about the feed additive Ractopamine. This had an even greater effect on shipments from Canada, which halved during the six month period, and the US, which dropped by 84%.

The EU benefited from the restrictions on imports from North & South America, particularly in the second quarter, when Russia purchased 33% more pork from the EU. This helped to provide support to EU pig prices, contributing to the upward momentum of recent weeks. During the quarter, Denmark displaced Canada as the second most important pork exporter to Russia. As a result, despite weak EU trade in the first quarter, Russian pork imports from the continent increased by 7% between January and June. Other than Denmark, the growth came from smaller EU suppliers, such as the Netherlands, Poland and Hungary; during the six months pork shipments from larger suppliers Germany, Spain and France were all lower.

Three more countries comply with EU sow stall ban

Latest information from the EU Commission indicates that three more member states have now complied with the partial ban on sow stalls, which came into force at the start of this year. They include Spain, which has the EU’s largest breeding herd, as well as the Czech Republic and Malta. This brings the total number of compliant countries to 13. Of the remainder, infringement procedures, begun in February, continue against nine member states, including major producers such as Denmark, France, Germany and Poland. Commission investigations continue into the situation in the remaining six countries, including the Netherlands, Italy and the EU’s newest member, Croatia.

UK pig prices

For the week ended 3 August, the EU-spec DAPP edged up very slightly to 168.34p per kg. The pig market was reasonably balanced in the latest week, as expected during this time of the year. At the current price, pig producers received 18p more per kg compared with the same week last year. Weekly slaughterings were an estimated 163,600 head, slightly higher than the same week in 2012. The average carcase weight stood at 78.81kg for the week ended 3 August, almost unchanged from the week before. While the weekly average was still higher on the year, pig growth was affected by the recent hot temperatures and therefore carcase weights have been suppressed. As a result, the seasonal upward trend in weights, which has normally started by now, is not yet apparent.

The weaner market picked up slightly in the week ending 10 August, as prices reached £53.75 per head. This meant that producers are receiving £14 more than a year earlier for each weaner sold in the latest week. The large annual difference is partly due to the feed crisis, which pushed producer confidence, and hence the weaner prices, down during this period in 2012. However, better prospects for the feed market have kept weaner prices firm as of late.

GB cull sow prices came up again for the week ended 27 August, to 114.72p per kg. This was 2p above the week before and a year-on-year change of 7p per kg. After a period of subdued prices, the cull sow market has bounced back from mid-May onwards and, since then, prices have increased by almost 18p. The number of sows culled in the week totalled almost 5,000 head, down 7% on a year earlier when cullings were inflated by the high feed prices.

EU sow prices following pig prices higher

As usual, cull sow prices in the EU have recently followed the trend of the finished pig market, although the recovery of prices has been less dramatic. In Germany, the key market for sow meat in the EU, the price for an M1 Grade sow was stable at €1.35 per kg between late February and late April. The sow price then fell to €1.28 by mid-May but into June the recovery of the finished pig market led to a similar rally in the sow price, taking it to €1.42 by week ended 28 July. This was the highest level of the year so far.

Prices elsewhere broadly followed the German trend. French and Dutch quotes also increased by 14 cents between mid-May and the end of July to stand at €1.28 and €1.19 respectively. Having initially been slow to respond, Danish prices have jumped sharply, adding the equivalent of 16 cents in the latest two weeks alone. At €1.15, the Danish price is now as close as it has been to the German one since early 2012. The gap between GB and German prices has also narrowed in recent weeks, partly due to some weakening of the pound against the euro. However, GB prices still lag behind German ones, as has been the case since last summer when domestic sow slaughterings rose due to high feed prices.

Feed market update

The November UK feed wheat futures price closed below £160/t on 5 August for the first time in 13 months and has not looked like regaining that position since, closing at £159.30/t on Tuesday, £3.20 lower than a week earlier. With the lack of a major weather event affecting the US maize or Russian wheat crops, the risk premium is being removed from the price. Global wheat prices have seen some support recently on strong export demand from Japan & Egypt. The UK harvest is progressing between showers and at end of July, 10% of the winter barley was estimated to have been cut, with yields and quality close to average.

The Hi-pro any origin soyameal (ex-store East coast) price as at Friday was £417/t for August delivery, down £15 on the week. In the week ending 4 August, 64% of the US soyabean crop was in good/excellent condition. The USDA has resurveyed the soyabean area in 14 states and the results will be released on 12 August. This should give a better idea of the final planted areas, especially where soya crops following wheat may have been delayed or abandoned due to the late wheat harvest. Rape meal prices have continued to decline due to improving global rapeseed crop conditions on top of the favourable US soyabean crop. An increase in rapemeal availability is likely to pressure prices and increase competitiveness in rations compared with other protein sources.

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

Japanese import market subdued in the first half of 2013

Latest figures for Japanese pork imports showed a 5% decline between January and June this year, to 360,200 tonnes. This indicated subdued demand for the third consecutive quarter, partly on the back a recovery in the domestic production. In addition, the weaker yen since the start of the New Year also played a part. With the gate price fixed in yen terms, unit prices available were significantly lower in dollar or euro terms, reducing the attractiveness of the Japanese market to exporters. Nevertheless, imports from the EU were up by 10% and this was mainly attributed to higher supplies from Spain (up 29%) and Poland (up 76%).

Pork imports from the primary supplier, the US, were 13% lower and offset the rise from the EU countries. Imports from Canada also came down by 18%. Together, these two countries account for well over half of Japanese imports. Mexico, on the other hand, increased their exports to Japan by a quarter compared with the same period in 2012.

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