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AHDB Pig Market Weekly

07 November 2013

AHDB Pig Market Weekly - 7 November 2013AHDB Pig Market Weekly - 7 November 2013

In the 12 weeks to 13 October, consumer spending on pork increased 3% compared with last year, according to Kantar Worldpanel.


Retailer promotions boost roast pork purchases

Volume sales dipped 2% over the same period, with fewer shoppers buying pork. Pork chops and steaks, which account for almost 40% of sales, recorded a 2% fall in purchases. British pork has outperformed the market, however, with volumes up 7% and expenditure increasing 13%, with more shoppers buying British more frequently.

In the latest four weeks, pork made strong gains of 10% in both volume purchases and spending. These have been due to the performance of leg and shoulder joints, in particular, as a result of increased promotions at the major retailers. Over the whole 12-week period, purchases of shoulder and loin joints fell but those of leg joints increased 8%, with shoppers switching in from beef and lamb joints, encouraged by the promotional activity.

A 6% reduction in purchases of bacon meant the value of sales dipped 1% in the 12-week period. All cuts recorded declines, with rashers down 5%. Spending on sausages increased again, driven by a 17% rise in the average price paid. Volume sales have continued to fall, although premium sausages are still performing well. Low fat sausages, although a much smaller share of the market, have also shown strong growth. After a strong summer, volume growth for sliced cooked ham has slowed to 1%, with spending up 3%.

EU export growth led by Russia

EU-28 pork exports in August reached 143,800 tonnes. This was an increment of 4% year on year. Growth was entirely driven by strong performance in the leading market, Russia, where volumes were up by two-thirds from August 2012. The EU continued to fill the gap left by Russian restrictions on other suppliers, notably the US and Canada. Most other major markets, including China, imported less EU pork than a year earlier, although shipments to Hong Kong were slightly higher. The fall in exports to China was the first year-on-year decline since March 2010 and contrasts with a 44% increase for the year to date. Total EU pork exports in the first eight months of this year were 1.04 million tonnes, almost unchanged from the same period in 2012. The value of these supplies edged down to just under €2.5 billion.

Pig offal exports came down by 3% compared with August 2012. At 78,300 tonnes, this was 16% below the same month in 2011. The reduction was largely a result of a 17% decline in purchases by the Chinese market, while supplies to Hong Kong were up by a quarter. Together the two markets accounted for 63% of the overall EU offal export trade. As the third largest market, exports to Russia also fell by 15% on the year. However, the Philippines market continued to re-emerge, accounting for nearly 5% of shipments in August.

UK pig price

The EU-spec DAPP edged down to 172.03p per kg for the week ended 2 November, down 0.07p per kg on a week earlier. The stable price in recent weeks reflects a well-balanced market, with demand for British pig meat still firm, despite falling EU prices. The annual difference in pig prices remained at 13p per kg for the latest week. The estimated weekly slaughterings totalled 172,000 head, which was 3,800 head higher compared with the same period in 2012. Carcase weights increased for the fifth consecutive week at 80.56kg, their highest level so far this year. This was 260g up on the week and pigs were a kilo heavier compared with the same week last year.

This week AHDB/BPEX has published a new weaner price series for the first time. This replaces the old “spot price” approach with a new series recording the actual prices paid for all weaners traded in the previous week. The new series has been tested over the last few months and it is typically slightly higher than the old series and somewhat more volatile. This is because it better reflects differences in the mix of pigs sold in any given week, including those attracting a price premium. For the first time, a price for 7kg weaners will be published as well as the new 30kg weaner price. To view a more detailed explanation of the new price reporting methodology please click here.

For week ended 2 November, the 30kg weaner price on the new basis was £55.93 per head. This was a bit under £2 higher than the price for the previous week based on the old method. However, it was only a few pence higher than the previous week's price on the new basis, reflecting the ongoing stability of the weaner market which has been apparent since July. The 7kg weaner price for the same week was £42.60 per head, 25p below the price for the previous week but somewhat higher than prices for earlier weeks.

Government policies hold back Russian pork imports

Russian pork imports fell 15% on the year between January and September, to 432,000 tonnes. Pork prices in Russia remain relatively expensive but WTO entry last year led to an increase in cheaper imports which pulled down wholesale prices. This prompted the government to introduce subsidies designed to support domestic producers in Russia’s drive towards self-sufficiency in pork supply. The resulting increase in production has reduced import requirements this year, while restrictions relating to the use of Ractopamine have hit volumes from some suppliers; Canadian and US shipments fell by 57% and 90% respectively. Brazil, the EU and some other smaller exporters benefitted, with the former becoming Russia’s largest supplier. However, an end to tariff reductions on imports from developing countries may have had a dampening effect on Brazilian shipments.

Imports from the EU accounted for 60% of the total so far this year, compared with just 43% last year. However, Russian restrictions have altered the balance of sources. Spanish and German shipments decreased by 29% and 6% respectively, due to the banning of imports from various plants on sanitary grounds earlier in the year. Though imports from Spain temporarily recovered, recent months have seen trade almost cease once again, with September shipments only 5% of the 2012 level. Other EU suppliers to the Russian market benefitted from this, helping countries such as Denmark, the Netherlands and Poland to substantially increase volumes.

EU sow prices fall back in recent weeks

As is normally the case, EU cull sow prices have broadly followed developments in the finished pig market. Having risen consistently since May, the key German M1 sow price peaked at €1.57 per kg in early September, but then lost nine cents in four weeks. It has since stabilised around €1.49 per kg since, well above its level for most of the year but below the €1.62 recorded last autumn. The recent fall in price appears to have been driven by the pig price, which experienced a similar fall during September, rather than anything specific to the sow market. Historically, sow prices have tended to be firm in the run up to Christmas, as demand from manufacturers is high, but this seems less likely this year. Quotes then typically fall around the holiday season as many manufacturers shut down for a period.

Prices elsewhere have largely followed the German lead, given that Germany is the main EU market for sow meat. The Dutch price, in common with the German one, peaked during early September, although it has been unchanged since late October. Danish quotations reached their peak slightly later in September, though they have also fallen since. However, the Danish price has been firmer than elsewhere, leading to the gap between the German and Danish quotes narrowing somewhat.

Feed market update

The UK feed wheat Nov-13 futures price experienced a 1% decline in the week to Tuesday and closed at £163.85/t. The Chicago Dec-13 maize futures price settled at its lowest level in more than three years at $167.32/t, while the Chicago Dec-13 wheat futures price closed 4% lower on the week at $241.01/t. The global grain market has recently continued on a downward trend with the US maize harvest progressing well and forecasters increasing crop estimates further. In order to stimulate exports, the Indian government has confirmed that the export floor price for wheat will be reduced from $300 to $260/t. However, it is worth bearing in mind that feed wheat must compete with cheaper maize into feed rations, depending on nutritional requirements.

The Dec-13 Chicago soyameal futures price closed at $432.98/t on Tuesday, down $19.85 (4%) on the settlement price a week before. In the UK, the Hi pro soyameal (Ex-store, East Coast) price for November delivery was £375/t as at 1 November, down by £18 on the previous week’s nearby price (October delivery) . The rapemeal (Ex-mill Erith) price for November delivery also declined over the week, by £9 to £206/t. The global soyabean market is also currently being directed by the on-going US harvest, which is seen to be progressing well. Soyabean planting in Brazil has reportedly progressed well in recent weeks and the country is still expected to produce another record crop if conditions remain favourable.

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

Fall in Japanese pork imports

Japan imported 547,000 tonnes of pork from January to September this year, representing a 6% decline on the same period in 2012. As usual, the majority of the imports have been sourced from non-EU countries but the proportion of imports from the EU rose by three points to 31%, compared with the corresponding period last year. Denmark remains the leading EU supplier but Japan has imported 8% less pork from the country this year, with considerable increases reported for several other suppliers, notably Spain (up 35%) and Poland (42%). Denmark has been experiencing an increase in piglet exports and a resulting decrease in domestic slaughter.

Imports from the US, the largest supplier to the Japanese pork market, declined by 12% year on year, while Canadian pork imports fell by 20%. This was despite an 11% increase in chilled shipments, for which these two countries are the dominant suppliers. Frozen imports were down 14% overall but volumes from the US and Canada were down 38% and 47% respectively.

Japan imported 146,000 tonnes of processed pig meat products during the nine month period, nearly two-thirds from the US. This trade was up 6% on the year, although shipments from China, the second biggest supplier, were lower. The country also bought 13,300 tonnes of pig offal from January to September 2013, 10% less than the quantity imported for the same period in 2012, with the US and Canada again the main suppliers.

Small rise in pig farm incomes but many still losing money

Latest figures from Defra show that the average Farm Business Income for specialist pig farms in 2012/13 was slightly higher than the previous year at £41,000. The only other type of farm recording an increase was specialist poultry farms. Nevertheless, pig farm incomes remained below the £47,500 average for all farms. The increase is attributed to a rise in output, due to higher pig prices, while feed costs did not rise to the same extent; it is worth remembering that feed prices were also high in 2011.

Despite the overall improvement, the figures also show that a higher proportion of specialist pig farms had negative incomes than any other type of farm. Over a quarter of pig farms were in this position, while more than half had incomes below £25,000. This is partly because of the lack of single farm payments or other support payments (such as for agri-environment schemes) for many pig farms. On average, specialist pig farms received only £8,800 from these payments, compared with over £30,000 for all farm types, but many will have got little or no support.

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