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AHDB Pig Market Weekly

24 October 2013

AHDB Pig Market Weekly - 24 October 2013AHDB Pig Market Weekly - 24 October 2013

Provisional figures from DEFRA indicate that the UK pig herd stood at 4.85 million head on 1 June. This is 8% higher than at the same point in 2012, mostly due to 9% more fattening pigs.


Rise in UK pig herd but sow numbers down

These figures would place the total herd at its largest size since 2006, in contrast to the record low level recorded in the last December census. However, an increase on this scale appears unlikely given the reduction of the breeding herd last year, even allowing for a significant increase in sow productivity. Furthermore, most of these fattening pigs would have been finished in the months since June but there has been no significant uplift in slaughterings.

The total breeding herd declined by 1% on the year, with 4% and 5% fewer in-pig sows and gilts respectively. Maiden gilt numbers helped partially offset the fall, increasing by 4%, suggesting the trend towards younger, more productive, breeding sows continues. The maiden gilt numbers may also signal some optimism among producers. Nevertheless, with productivity gains meaning more fattening pigs can be produced using fewer breeding pigs, there seems less need for the breeding herd to expand back to historic levels, even if producers have an optimistic outlook.

EU export market stronger in July

EU-27 pork exports increased by 11% year on year in July, to 147,500 tonnes. Supplies to the leading market, Russia, were up by almost half from July 2012 as the EU continues to fill the gap left by Russian restrictions on other suppliers. Growth was also driven by a 27% rise in exports to China, which largely consisted of frozen pork. Hong Kong was in a similar position, with exports increasing by 34%.

In contrast, Japan and South Korea reduced purchases by 1% and 10% respectively. These two countries are generally taking less product from global markets as their domestic supplies have recovered from the shortfalls in previous years. Total pork exports in the first seven months of this year were 925,000 tonnes, almost unchanged from the same period in 2012. The value of these supplies edged down to just under €2.2 billion.

Pig offal exports declined by 6% compared with July 2012 to 84,100 tonnes and were 8% down from the same month in 2011. The reduction was largely a result of a 16% decline in purchases by the Chinese market, while supplies to Hong Kong were only marginally up. Together the two market account for 69% of the overall EU offal export trade. As the third largest market, exports to Russia also eased by 4% on the year. The Philippines market continued to re-emerge, accounting for nearly 5% of shipments in July.

UK pig price

The EU spec DAPP continued to increase for the week ended 19 October to average 172.04p per kg. This was a small week-on-week increase of 0.35p and the price has now increased for eight consecutive weeks. Normally the finished pig market starts to strengthen at around this time of the year as we approach the Christmas season. The pig price in the latest week was 14p per kg above 2012 levels. The estimated weekly slaughterings fell to 166,600 head, down 3,800 head from the same period last year. Carcase weights edged up to 80.12kg during the same week. Compared with the same week last year pigs were around one kilo heavier.

After the dip in recent weeks, the weaner market edged up to £54.25 per head for the week ending 26 October. An uplift in the weaner market is normally expected during this time of the year. In the latest week breeders received £12 more than the same week in 2012.

Cost of production eases in October

Latest AHDB/BPEX provisional estimates show that the average cost of production in October was only marginally lower compared with the previous month at 147.5p per kg. This was the lowest monthly average since December 2011 but the rate of fall has slowed due to some stability in prices for compound feed. At the latest estimate, costs incurred by producers were, on average, 16p per kg lower compared with October 2012. However, while the cost of inputs utilised during the month is marginally down, pigs being sold during October will have been fed during a life cycle when feed was more expensive. A new report on production costs and their relationship to prices and margins in the supply chain can be found by clicking here.

The finished pig market strengthened as prices passed 171p per kg in recent weeks. This means UK farmers received a higher price for their pigs at a time when their cash outflow was reduced, particularly by a lower feed bill. Given that the feed costs currently account for 61% of total costs, the recent easing of prices has significantly improved the situation of producers. However, the cumulative losses of producers since the start of 2011 are still estimated at over £125 million. Therefore, margins will need to remain favourable for a sustained period before producers feel confident enough to make the investments necessary to improve the efficiency of the industry.

UK imports remain subdued

UK pork imports weakened again in August, down by 1,500 tonnes compared with the same month in 2012. At 28,100 tonnes, this represented a reduction of 5% on last year. Germany maintained its position as the main supplier from the previous month; imports from the country increased by 30% year on year. However, this increase was offset by stable or lower imports from other key suppliers, including Denmark, the Netherlands, Ireland and France. Lower shipments from Germany (down 12%) and the Netherlands (down 30%) meant that UK cured pig meat imports fell to 19,500 tonnes. This was 14% lower compared with the same month a year earlier. Sausage shipments declined by just 1% on the year. In contrast, 13% more processed pig meat was imported into the UK, with a significant rise from Danish suppliers.

Pork exports from the UK increased by 6% compared with August last year. This was partly a result of increased demand on the back of tight supplies across the continent. Irish purchases rose by a notable 41%, making it the largest market during the month, but the UK shipped 27% less to Germany. There was a notable contribution from non-EU countries, in particular from China (up 31%) and Hong Kong (up 35%). Bacon and processed shipments also strengthened. However, offal exports fell by 22% in August compared with a year earlier. While trade with Hong Kong and China remained high, this was more than offset by lower demand from the continent.

Chinese imports continue to grow

The Chinese pork import market continued to strengthen in the third quarter, up by 25% year on year, mainly the result of increased shipments from the EU and, to a lesser extent, Canada. In the first nine months of this year total Chinese imports reached a new peak of 430,000 tonnes, up 8% on the previous year. The EU achieved a further increase in market share accounting for 63% of total Chinese imports compared with 46% a year earlier. Germany displaced the US as the largest supplier with its shipments up 44% on a year earlier. This was due to Germany’s increased price competitiveness and China’s import requirement of providing a ractopamine-free test report for the imported pork.

In contrast, because of ongoing ractopamine issues, China imported 49% less pork from the US, although volumes from Canada increased by half on the year. In the case of Spain trade declined by 1% while Danish shipments were up by a quarter. While the UK and Poland are smaller suppliers, trade with these countries increased sharply. The UK shipped 14,700 tonnes in January-September 2013 compared with only 860 tonnes a year earlier with monthly shipments now settling down at just over 1,600 tonnes. Overall, the value of Chinese pork imports amounted to RMB 5 billion, 5% up on the previous year.

Pig offal imports between January and September, at 607,000 tonnes, were marginally down on last year. Trade with the EU increased almost 50% and so its market share was up to 53% compared with 35% a year earlier. However, the increase for the EU was offset by a 43% decline in US offal shipments. Of the main EU countries, Germany showed the largest volume growth but again both Poland and the UK have emerged as significant suppliers with trade for the latter amounting to 10,500 tonnes in January-September. The value of offal imports in the first nine months of this year totalled RMB 6.9 billion, 6% up on the year.

September pig supplies only marginally up

UK pig supplies were only marginally up on the year with slaughterings in September 2,900 head higher at 789,100 head. Throughputs in England and Wales rose by 6% compared with September 2012. However, reductions in other regions offset this increase. Scottish throughputs continued to decline (down 59%) after last year’s plant closure. Similarly, 2% fewer animals were slaughtered in Northern Ireland compared with a year earlier. The year to date figure and the third quarter figure also showed similar trends by region, with UK throughputs at a similar level to the same periods in 2012. The number of sows and boars culled in September was 20,000 head, down 15% from the 2012 level, representing a return to more normal levels from the inflated slaughterings last year.

Clean pig carcase weights in the latest month reached 79.6kg, the highest since February. Lower feed costs have allowed farmers to add more weight to their animals. As a result, pigs in September were 1.8kg heavier than in the same month of 2012. Given the slight rise in slaughterings combined with an increase in the weight, pig meat production in September totalled 65,700 tonnes. This was an increment of 2% compared with the same month last year. The year to date pig meat production reached 616,200 tonnes, 1% above the level a year before.

Feed market update

The UK feed wheat Nov-13 futures price closed at £164.60/t on Tuesday (22 October) representing a weekly increase of 0.8%. The Chicago Dec-13 wheat futures price closed $5.51 higher on the week at $257.46/t while the Chicago Dec-13 maize futures price settled at $172.54/t on Tuesday, a decrease of $2.07 on the previous week given the favourable US harvest.

Defra provisional estimates indicate that UK wheat production in 2013 is at the lowest level for 10 years (12.1Mt). In contrast the barley (7.1Mt) and oat (975Kt) crops are the largest since 1997 and 1973 respectively. In 2013/14, considerable substitution of wheat into other grains is expected and the price competitiveness of barley and maize will determine how this occurs.

The Dec-13 Chicago soyameal futures price closed at $ 458.67/t on Tuesday (22 October), up $15.10 (3.4%) on the week, supported by strong export demand for US soyameal even though reports continue to suggest better US yields than expected earlier in the season. In the UK, the Hi pro soyameal (Ex-store, East Coast) price for October delivery was £391/t as at 18 October, a decrease of £14/t on the previous week.

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

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