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AHDB Pig Market Weekly

03 October 2013

AHDB Pig Market Weekly - 3 October 2013AHDB Pig Market Weekly - 3 October 2013

Recent weeks have seen a reversal of fortunes in the EU pig market.


EU pig price falls back from near-record high

Having risen steadily since May, the EU average price reached a peak in the first week of September at over €195 per 100kg. This was the highest level it has reached apart from during the FMD outbreak in March 2001. However, since then the price has fallen back by over €5 in two weeks to stand at €190.06 in week ended 22 September. The change of trend has been driven by a reported increase in the supply of pigs in recent weeks, relieving the tight supply situation which had prevailed over the summer. This is partly because pigs whose growth was slowed during the heat of the summer are now coming to market.

The recent price fall has been particularly apparent in northern member states, precipitated by a drop in the German reference price, which fell by 14 euros in the three weeks to 22 September. The exception was Denmark, where robust export markets kept prices steady through most of September. Further south, prices remained stable or even increased until the latest week, when most eased back slightly. The UK was one of the few member states where prices were still rising in mid-September. As a result, having briefly been below the EU average, the UK price re-established its premium in September, with the gap opening up to 7p per kg in the latest week. However, this was still smaller than the premium during most of the spring and early summer.

Dutch pig meat exports declining but live exports up

As with many European producers, Dutch pork exports declined through the first half of the year, down 8% year-on-year. The drop accelerated each month, with June exports over 20% lower than in 2012. Exports to Germany and the UK were particularly affected, although exports to all major markets except Greece fell. Pork exports to Hong Kong increased significantly on the year, with Russia and Japan other growth markets among third countries. Bacon exports have shown little change, still principally bound for the UK. High unit prices for pork and bacon also continued through the period, delivering a total pork export value of almost €700m with bacon adding a further €150m. Offal exports rose 4% in volume, largely accounted for by a 63% increase in exports to the UK, making it the Netherlands’ third largest offal market.

Dutch pig meat production was lower year-on-year over the 6 months, contributed to by a 7% rise in live exports. Increased weaner exports accounted for most of the rise and continued to form the majority of the Dutch live trade. Germany remained the largest recipient, although Spain had the largest absolute increase of 180,000 head. Slaughter pig exports to Germany were also significantly higher than the first half of last year. High and rising pig prices delivered a record total value for Dutch live exports in the first half of the year.

UK pig prices

The EU-spec DAPP continued to increase for the week ended 28 September, at 170.71p per kg. Demand for pig meat generally eases during this time of the year but with retailers still preferring British pigs and export demand robust, prices have remained firm this year. Finished pig prices were only slightly higher than the previous week but the price remained 16p per kg higher than the same week in 2012. Estimated throughputs for the week totalled 171,100 head, marginally up on the previous week. However, 6,200 more pigs were slaughtered compared with a year earlier. For the first time in nine weeks, carcase weights fell marginally to 80.06kg for the week ended 28 September. At this weight, pigs were still over a kilo heavier than a year earlier.

Weaner prices rose for the fifth consecutive week to £54.42 per head, mainly on the back of the rise in the finished pig market. This was only a marginal change on the week but the annual difference meant that the weaner price was almost £15 above last year’s level. Despite the sluggish weaner market of late, the current price is close to the peak in May 2010, the highest level reached since the record prices of 2009.

US pig numbers up marginally

According to latest figures published by the USDA, pig numbers on 1 September were slightly up from a year earlier at 68.4 million head. This is also 3% higher than on 1 June, in line with the usual seasonal pattern. The number of pigs for slaughter, at 62.5 million, showed a similar marginal increase on the year, with a 4% fall in the number of pigs weighing over 87kg offset by increases in all other weight bands. This suggests that the impact of the PEDV outbreak has been limited at a national scale. There was also a small rise in the number of breeding pigs on the year to 5.81 million, although this is a slight decline from June.

The pig crop for the June to August quarter was up 2% on the year to 30.2 million head, as the average number of pigs per litter rose to a new record high of 10.33. This was caused by an increase in the average pigs per litter of smaller operations, narrowing the spread in sow productivity slightly. The number of sows farrowing was steady at 2.93 million. Intended farrowings for September to November are 2.90 million, which would be a marginal increase over the same period last year. There are signs of optimism with intentions for farrowings in the winter quarter set to be 1% higher on the year at 2.87 million.

New EU origin labelling proposals

The EU Commission has revealed proposals to introduce ‘Country of Origin Labelling’ (COOL) laws within the European Union for unprocessed meat products (including bacon). The proposals will require products to carry a label giving the country of slaughter and the last country in which the animal was reared for at least 2 months. The labels would not have to list the location of the animal’s birth.

By leaving the location of the animal’s birth off the label and only listing the country where the animal was finished, it could still be possible for pork from some imported animals to be marketed as British. In 2012, the UK imported nearly 700,000 live pigs, although nearly 90% of these were coming for slaughter in Northern Ireland from farms in the Republic of Ireland and could not be labelled as reared in the UK. In theory, livestock from foreign producers could still be used without sacrificing the valuable ‘British pork’ label, provided they were finished in the UK. However, pork from these animals could not carry the Red Tractor logo unless the breeding farms were approved by the scheme; few, if any, non-UK pig farms are currently Red Tractor approved.

This move from the EU comes at a time when confidence in the food supply chain is low following the horsemeat scandal. A recent One Poll survey revealed that 78% of consumers wanted supermarkets to stock more British food. The same survey stated that 42% were more likely to buy more traceable food produced on British farms following recent events. A vote on the new proposals is expected to take place in November with an agreement needed by December 2013. The proposals are set to come into force in December 2014.

Feed market update

The UK feed wheat Nov-13 futures price closed at £154.90/t on Tuesday, up 1.2% on the week before, while the Chicago Dec-13 maize futures price closed 2.2% lower over the week at $172.83/t. The Chicago Dec-13 wheat futures price closed at $250.29/t on Tuesday, a weekly increase of 3.5%.

The spread between wheat and maize was exacerbated following the September quarterly stocks report published by the USDA on 30 September, which showed stocks as at 1 September. Maize stocks were higher than had been anticipated, causing prices to fall afterwards, while wheat stocks were lower than expected. The US wheat - maize spread now favours more global maize feeding, where possible, and this could impact the world demand for feed wheat.

The Dec-13 Chicago soyameal futures price settled at $445.76/t on 1 October, down $8.72 (1.9%) on the previous week. Soyabean prices also came under pressure last week due to the stocks report which showed larger than expected levels of inventory. In the UK, the Hi pro soyameal (Ex-store, East Coast) price for October delivery was £382/t, as at 27 September, unchanged on the previous week. The rapemeal (Ex-mill Erith) price for October delivery was up £1 over the week to £184/t. The domestic oilseed rape harvest is nearly complete, with just 10% of the spring crop remaining.

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

Belgium exports more pork

Belgium exports around 60% of its total domestic pig meat production, the majority in the form of carcases or half-carcases. In the first half of this year, its pork export trade strengthened by 6%. The vast majority of supplies were destined for the European market, with less than 6% heading for non-EU countries. Shipments to the main market, Germany, accounted for 41% of overall trade and exports to the country increased by 3% on the year. However, growth was mainly driven by increases in exports to Poland and the Netherlands, up by 24% and 27% respectively. In contrast, the UK reduced purchases by 3% but this is a relatively small market for Belgium and therefore the impact of the decline will have been minimal. The value of exports in the first six months totalled €679 million, up 7% compared with the same period in 2012.

While Belgium is largely self-sufficient, the country imported 30,700 tonnes of pork. This was 17% down compared with the January and June period last year. This may indicate a relatively weaker demand for pig meat in Belgium, given that almost all of the increase in domestic production was translated into exports.

Chinese acquisition of Smithfield Foods completed

Last week, the acquisition of US pork giant Smithfield Foods by China’s Shanghui International Holdings Ltd was completed, following approval by Smithfield shareholders. The deal, valued at $7.1 billion including debt, represents the biggest ever Chinese takeover of a US company. The purchase was cleared by the Committee on Foreign Investment in the United States two weeks ago, clearing the way for the shareholder vote. Smithfield has more than 46,000 employees and has facilities in 26 US states, including the world’s largest slaughterhouse and meat processing plant in North Carolina. It also operates in Mexico and in 10 European countries. The company raises 15 million pigs each year and processes a further 12 million.

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