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AHDB Pig Market Weekly

28 November 2013

AHDB Pig Market Weekly - 28 November 2013AHDB Pig Market Weekly - 28 November 2013

German pork exports during the third quarter increased 2% on the year to 427,000 tonnes, a slightly lower year-on-year increase than in the second quarter.


German exports still performing strongly

Between January and September, over 80% of exports remained in the EU, with a 5% increase in exports to the Netherlands, due to tight supply there, and an 8% rise in shipments to Italy. Cost advantages in Germany reportedly encouraged Danish Crown to switch some of its processing of pork for the Danish market to Germany, contributing to the 39% increase in exports to Denmark. Strong competition in the Polish market led to a fall in shipments.

Outside the EU, Germany gained market share in China with an 11% rise in shipments, due to the US and other major suppliers being adversely affected by a ban on Ractopamine-fed pork. On the other hand, a partial ban on German exports to Russia on sanitary grounds contributed to a 7% decline in trade. However, by the third quarter the situation had reversed, with exports to China lower year on year, while shipments to Russia were higher than in 2012. Unit prices of German pork exports increased slightly, keeping them relatively expensive within Europe, resulting in the total export value increasing by 6% to €2.9bn.

Imports into Germany declined 2% on the year for the January to September period, with a slightly larger 6% fall in the third quarter. Belgium and Denmark continued to be the principal sources, together accounting for 69% of imports in the year to September. However, less pork was received from most major suppliers in the third quarter, except Spain and France. Tighter supplies across the EU are likely to have led to the decline. Average prices were little changed from last year, leading to a total import value of €1.3bn in the nine month period, 3% lower than a year earlier.

Falling EU pig prices

Having reached a peak in early September, EU pig prices began to fall back as the month progressed. The EU average reference price for October fell by nearly €11 to €180.45 per 100kg. It continued to fall thereafter, reaching €170.56 per 100kg for the week ended 17 November. This was almost €25 lower than the peak two months ago and was around €10 below its level a year earlier. Prices have been below year earlier levels since mid-September, the first sustained period when that has been the case in three years. Declining prices in the EU reflect a combination of some easing of the supply situation and subdued consumer demand in the EU, with reports of some worsening of the export situation.

Outside the UK, prices have generally fallen across all member states with the exception of Ireland, where prices increased by just over €10 in the 10 week period to 17 November. The largest recent decline was recorded in Poland, where pig prices fell by €14 (down 8%) in the month to 17 November. During the same four week period, pig prices in the Netherlands and Germany decreased by 7% and 6% respectively. Price reductions in other major member states varied between 3% and 5%. Given the recent stability in UK prices, the gap between the UK and EU prices has widened and in the latest week the difference reached €29 per 100 kg.

UK pig price

The EU-Spec DAPP was unchanged at 171.35p per kg, for the week ended 23 November. The pig market showed a similar trend to 2011 when prices at this time of the year remained flat. However, the recent slowdown in the finished pig prices goes against the increase seen last year. Nevertheless, the stable market suggests that demand for British pigs remains strong despite EU pig prices being much lower. The annual increase in pig prices fell to just below 11p per kg. The estimated weekly throughputs totalled 166,100 head. This was 3% lower compared with the same week in 2012. The average carcase weight for the week ended 23 November edged down from a week earlier to 80.12kg. At this weight, pigs remained, on average, a kilo heavier than the same week in 2012.

The price of a 30kg weaner fell slightly to £57.18 per head for the week ended 23 November. The slow finished pig market in the recent weeks may have contributed to this. However, weaner prices remain historically high, having last reached this level in 2009. Growers paid £12 per head more this year compared with the same week in 2012. On the other hand, prices for 7kg weaners increased to £43.22 per head during the same week. This was almost a £1 increment on the previous week.

EU exports driven by Russia

EU-28 pork exports in September reached 140,500 tonnes. This was an increment of 14% year on year, the biggest monthly rise so far this year. Growth was driven by strong performance in the leading market, Russia, where volumes were up by 26% from September 2012. The EU continued to fill the gap left by Russian restrictions on other suppliers, notably the US and Canada. Unlike the previous month, most of the major Asian markets, including China, Japan and Hong Kong, also purchased more EU pork compared with a year earlier. Total EU pork exports in the first nine months of this year were nearly 1.2 million tonnes, 2% up from the same period in 2012. The value of these supplies increased by 1% to €2.82 billion.

Pig offal exports also strengthened compared with September 2012, being up by 5%. The increment was largely a result of a rise in purchases from Hong Kong, which was the primary buyer of EU pig offal during the month. This was partly offset by a fall in shipments to mainland China and to Russia, whose purchases were down by nearly half. The recent strong performance of exports to the Philippines continued, with volumes up by more than a quarter year on year.

Record Carcase weight in October

According to the latest figures, UK clean pig slaughterings in October totalled just over 1 million head. This was less than 1% up on the same month in 2012. However, the year to date total showed that UK pig supplies remained somewhat tight, with only a very marginal rise for the January to October period this year. Following the historical trend, October recorded the highest weekly kill so far this year. The number of sows and boars culled in October was down by 12% on the year to 2012. Last year, cullings were inflated in response to the high feed prices at the time.

For the first time in history, UK carcase weights averaged over 80kg in October. The latest monthly average weight reached 80.28kg, over a kilo heavier compared with the same month in 2012. Carcase weights have generally remained above last year’s level for most of 2013 as a result of lower feed costs and processors looking to offset tight pig supplies. As a result of increased throughputs and higher carcase weights, pig meat production in October reached 84,900 tonnes. This was 1,600 tonnes (2%) above the previous year’s level. At this level, pig meat production was the highest recorded for October since 1999.

Feed market update

With the US maize harvest reported by the USDA to be 95% complete as at 24 November, there is now more or less confirmation of the 2013 record crop. Thus, it is very unlikely that there will be a major reversal in the lower maize price direction compared with this time last year. The UK feed wheat futures price for Jan-14 delivery was worth £164.35/t as at Tuesday’s close, representing a slight decrease on the previous week. The Chicago maize futures price for Dec-13 delivery settled at $164.76/t, a minimal increase on the previous week’s close but considerably lower than $247.64/t, the same time last year. Wheat prices continue to see less influence from maize prices, due to specific market drivers. The most recent has been unfavourable weather causing supply concerns in Argentina (dry) and Australia (unseasonal rains and frost).

Protein prices are currently driven more by strong demand, particularly from China, as there is yet to be any threat to the 2013 global soyabean production. The Chicago Dec-13 soyameal futures price increased over the week to Tuesday, to $496.26/t, compared with $450.73/t the previous week. Although there is no threat to soyabean production, as yet, strong demand has stopped prices from falling, despite the bumper crops produced recently.

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

A small rise in UK cost of production

According to AHDB provisional estimates, the cost of pig production increased slightly in November with the latest estimate putting the full production cost at 147.3p per kg. This was around 3p higher than the revised estimate for October but was more than 14p down from November 2012. The downward trend can be attributed to lower feed prices in recent months but a slight increase in recent weeks has led to higher overall costs. Nevertheless, the latest cost of production figure is 26p down on the peak recorded in January.

With rising costs and stable pig prices, the gap between the two has narrowed slightly in November. However, producers are still making positive net margins. In the latest month, the producer was estimated to receive around £19 more per pig sold than they paid out during the month. However, recent positive margins have not yet come close to offsetting the losses accumulated over the years when costs were above their returns. Cumulative losses since the start of 2011 are still estimated at nearly £110 million, even after allowing for the recent improvement.

November Pig Market Trends out now

The November edition of Pig Market Trends (PMT) was published on Tuesday. Regular readers of PMT will notice some differences in this month’s edition. It still provides a summary of developments in the UK and EU pig markets and the global feed market over the last month. However, from this month, each edition will also include a number of more detailed articles, providing analysis and insight about particular issues affecting the UK and global pig market. This month’s issue includes articles on:

  • International Costs of Production - The latest in AHDB/BPEX’s series of annual reports comparing production costs internationally shows that GB costs were still higher than elsewhere in the EU. The article analyses the reasons for this and what British producers would need to do to close the gap.

  • Market Impact of notifiable disease - There has been a lot of interest in the industry recently about the risk of a disease outbreak. The article examines the scale of the potential market impact and what it might mean for pig prices.

  • Global market outlook - USDA has recently published its biannual outlook for the global meat sector. This article looks at what the report says about production levels around the world and what this might mean for international trade and for the EU market.

  • EU-Canada Free Trade Agreement - The EU and Canada have agreed terms for an FTA, likely to come into force in 2015. This will provide Canada with greater access to the EU pork market and the article examines the potentially significant implications for European producers.

DOWNLOAD REPORT:- Download this report here

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