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AHDB Pig Market Weekly

23 August 2013

AHDB Pig Market Weekly - 22 August 2013AHDB Pig Market Weekly - 22 August 2013

Latest figures published by HMRC show that UK pork imports totalled 30,600 tonnes in June. This was up 4% compared with the same month last year, suggesting a slight recovery in the demand for EU pork, which fell after the horsemeat scandal earlier this year.


However, imports remained below historic levels. There were increases from across the continent, including the two leading suppliers, Denmark and Germany, which supplied 2% and 12% more respectively. The Netherlands and Belgium were among the other member states that raised their exports to the UK. However, the increases were somewhat offset by large declines in imports from Ireland and France.

n contrast, cured shipments came down 9% during the month, mainly due to lower supplies from the Dutch and the Danes. Likewise, supplies of processed products were also down, by 2%, mainly due to lower availability from Ireland. In addition, sausage imports fell by 11% mainly on the back of lower Dutch supplies.

The export market, on the other hand, again performed strongly; pork shipments were up by 23% (or 2,400 tonnes) in June. While shipments to the EU increased during the month, growth was again mainly driven by significant supplies sent to China. Germany was the only key market that reduced its purchases, which is likely a result of strong production on its domestic market. There was also robust demand for pig offal from the Asian markets, up by a quarter compared with June 2012. Cured meat, including bacon, recorded an uplift, while processed supplies were balanced and fewer sausages were exported.

Production costs a little lower in August

Latest AHDB/BPEX provisional estimates indicate that the cost of pig production was a little lower in August at 157.1p per kg. This was around a penny down on the estimate for July and was mainly attributed to further easing of spot feed prices during the month. According to the latest estimate, the cost of production was almost 13p per kg lower compared with the same month last year.

With pig prices currently around 168p per kg, this means that producers will have positive margins again this month, with a cash profit of over £8 per pig during the month. However, while the latest cost of production estimate reflects current feed prices, pigs entering the supply chain now were fed on the expensive feed bought by the producers when prices were higher. As a result, the likelihood is that many farmers are not yet breaking even on the pigs which they are selling this month.

UK pig prices

For the week ended 17 August, the EU-spec DAPP fell for the second consecutive week to 167.86p per kg. This was 0.19p per kg below a week earlier. Pig prices have been relatively stable since late June and the year-on-year change again stood at just over 17p per kg. Throughputs during the week were estimated at 150,700 head. This was considerably down from the previous week and a year earlier, partly due to the closure of one major processing plant. Carcase weights remained largely stable at 78.89kg, with pigs weighing almost a kilo more than the same week in 2012 but less than they did in 2011.

The price of an average 30kg weaner edged up slightly to £53.66 per head. Despite prospects for a better feed market, the easing in finished pig prices has meant that finishers are unwilling to increase the price they pay, for now at least. At the latest quote, producers received just over £14 more per weaner compared with the same week in 2012.

In contrast to the sluggish finished pig and weaner markets, the cull sow price jumped up again for the week ended 10 August, to 119.81p per kg. Since the previous week, cull sow prices had increased by almost 4p per kg. Prices continue to follow the upward trend in the German market, with its cull sow price having risen by 18 cents since early June. Given the recent uplift in the sow market, the price for the latest week was 14p per kg above year earlier levels.

Contrasting trends in French imports and exports

According to the latest figures, French pork exports came down 2% in the first half of this year, with a total of 230,100 tonnes. The primary market, Italy, imported almost the same amount as the year before but shipments to the UK were down by 9%. Pork exports to many other key EU markets were also lower but shipments to Spain and Germany increased by 40% and 5% respectively. The dip in the French export trade was mainly due to weaker demand across the continent coupled with a small decline in domestic production. In contrast, supplies to non-EU countries increased by 2% which was mainly driven by higher demand from China and the Philippines, although shipments to Russia fell. The value of French exports totalled €435.1 million, down 2% on the year.

In contrast, pork imports into France totalled 183,700 tonnes, up 3%, between January and June this year. The upturn came despite lower domestic consumption reported by Kantar Worldpanel. While Spain maintained its position as the dominant supplier, its shipments were almost unchanged while imports from Germany increased by 19%.There were also notable increases from other EU markets, including Belgium and the Netherlands. Imports during the first half of the year were valued at €460.3 million, up 8% on the year.

English wheat area down but barley up

The provisional June survey results for England were published by Defra last Thursday. The results show an English wheat crop area of 1.51Mha, a 19% decrease on last year. This was mainly due to the difficult planting conditions farmers faced in autumn/winter 2012. A noticeable switch to spring cropping resulted in a 32% yearly increase in the English barley area, with a 92% rise in the spring barley area more than offsetting a decline in winter barley. The differing fortunes of the two commodities may mean that feed wheat and barley prices diverge from one another, possible resulting in more barley going into feed rations. If this occurs, it is likely to be most apparent in cattle feed rations as barley inclusion in monogatric diets will be capped to avoid negative impacts on animal performance.

The 2013 English oats area is also provisionally seen up on last year by 53% to 141Kha, the largest oats area for at least 30 years, if confirmed. For oilseed rape, the considerable increase in the spring area was not able to offset the fall in the winter area, meaning a 5% overall decrease on last year. This is unlikely to have a huge impact on protein meal prices as these are primarily driven by the global soyabean crop, which is expected to be larger in 2013/14 and has pressured prices lower. The final crop area results will be published by Defra in September.

EU exports strong again in June

Another strong performance in June meant that EU pork exports in the second quarter of 2013 were 6% higher than a year earlier. This marks a considerable turn around compared with the first quarter, when shipments were down 9% year on year. The main driver of the recovery was Russia, the EU’s leading market, which took a quarter more EU pork in the second quarter (and 18% less in the first quarter). This was largely due to Russian restrictions on imports of pork from the US, Canada and Brazil, which created opportunities for EU exporters. The growth of exports to China also continued, with volumes again up by nearly half in June. Hong Kong also took substantially more EU pork, although this was in comparison with a particularly low level of exports in June 2012. However, these increases were partly offset by lower shipments to other key markets in Asia and the Former Soviet Union.

June was also a good month for EU offal exports, driven by the leading markets of China and Hong Kong. Shipments to the latter nearly trebled, although again this was in comparison to a very low level a year earlier. This meant that overall exports were up by more than a quarter, despite lower demand from Russia, the other major market. June’s strong performance meant that offal exports for the first half of the year were slightly higher than a year earlier.

Feed market update

The Nov-13 London feed wheat futures price closed at £154/t on Tuesday, down by £0.50 on a week ago. The price settled as low as £150.75/t on Thursday as UK feed wheat features followed global markets lower, as well as dealing with the effect of importing more wheat into the UK in 2012/13 than was used. Chicago maize futures closed higher on the week at $187.2/t on Tuesday due to recent concerns for persistent dryness in some parts of the US. The dry weather was reflected in the latest US crop condition report as the maize crop in good/excellent condition decreased by 3 points to 61%, compared to a week ago.

The Hi-pro any origin soyameal (ex-store East coast) price as at Friday (16 August) was £408/t for August delivery, up £4 on the week but the rape meal price (ex-mill Erith) decreased by £4 from the previous week to £169/t. However, the soyameal price for the first half of September delivery was £392/t, down £16 pounds from August, implying that the lower price expectation for the 2013/14 season still stands.

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

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