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AHDB Pig Market Weekly

13 February 2014

AHDB Pig Market Weekly - 13 February 2014AHDB Pig Market Weekly - 13 February 2014

Latest AHDB/BPEX forecasts for UK pig meat supplies were launched at the AHDB Outlook Conference yesterday. They predict that the UK market may ease somewhat in 2014 but that supplies will remain relatively tight.


Tight supply situation to ease in 2014

The decline in the UK breeding herd in 2012 means that finished pig numbers will remain constrained in the near future. No significant expansion of the breeding herd is expected in the near future but a more stable position over the last year means productivity gains are likely to reassert themselves as the main driver of pig numbers. This should lead to slaughterings starting to increase as 2014 progresses, with throughputs for the year as a whole forecast to be 2% up on 2013.

Given lower feed prices, sow slaughterings and carcase weights are expected to be similar to 2013, meaning that pig meat production is set to rise at a similar rate to clean pig slaughterings, topping 850,000 tonnes for the first time since 2000. UK imports were lower in 2013. A modest recovery is forecast for 2014, given slightly more plentiful EU supplies. If the large gap between EU and UK pig prices is sustained, then imports could be higher. Further growth in exports is expected, given higher production and the possible opening of more markets for a wider range of products. However, recent strengthening of the pound may limit gains. These developments mean that supplies available for consumption on the UK market in 2014 are likely to be slightly higher than in 2013 but will remain lower than in previous years.

More details on the outlook for UK pig meat supplies can be found by clicking here, along with presentations from the AHDB Outlook Conference. A review of the conference will appear in next Thursday's Pig Market Weekly.

Small rise in Danish pig herd

The latest figures published by Statistics Denmark show that the overall pig population on 1 January increased by 1% compared with the start of 2013. The total reached 12.4 million head. This was also 1% up on the final quarter of last year, going against the normal seasonal trend whereby the pig population declines towards the end of the year. The breeding herd followed a similar trend, while maiden gilt numbers rose by 10% and in-pig-gilts increased by 3% on the year. There can be large fluctuations in the number of gilts from census to census but these numbers suggest some optimism regarding the future production of piglets.

Piglet numbers increased 2% on the year, showing some signs of further improvements in productivity. In addition, the rise in piglets was reflected in a 1% increase in the count of weaners but fattening pig numbers remained unchanged. This was largely due to the continuing strength of the weaner export market, with Poland attracting an increasing number in addition to the more established German market. This could prevent any rise in piglet production being fully translated into Danish pig meat output.

UK pig price

The EU-spec DAPP continued to fall in the week ended 8 February and is currently at 165.20p per kg . This was a result of some subdued demand, as is normally the case during this time of the year, and ample supplies. The decline in finished pig prices may also reflect the recent downward pressure on the continent and this could continue given developments there this week as the impact of the Russian import ban on EU supplies takes hold. Nevertheless, the latest pig price remained almost 8p per kg higher than the same week in 2013. Carcase weights for the week averaged 80.45kg, up marginally year on year. The average probe measurement for the week ended 8 February fell to 10.9mm, dropping below 11mm for the first time since mid-August.

For the week ended 8 February, the average price for a 30kg weaner increased to £56.38 per head, one pound higher compared with the week previous and £10 above year earlier levels. Reports suggest that the increase is likely a result of tight supplies. In contrast, the price of a 7kg weaner edged down marginally to £41.32 per head.

Although average GB cull sow prices are still not available, it should be noted that in Germany the sow price has fallen sharply this week and this could impact on the UK price.

Lower EU pig slaughterings

According to the latest figures published by Eurostat EU pig slaughterings in November declined by 2% year on year to 20.7 million head, a slightly larger fall than the 1% recorded in the first eleven months of 2013. However, it is also worth noting that November 2013 had one less working day compared with the same month of 2012 and so per working day slaughterings showed a modest increase. The latest decline in EU pig slaughtering was a result of fewer pigs entering the supply chain in most of the main northern markets. The largest fall was recorded in the Netherlands, down 12% compared with November 2012. Pig slaughterings in Denmark and Ireland fell by 10% and 7% respectively. In contrast, Italy and Poland recorded increases in their output. As there was stability in carcase weights, EU pig meat production in November also fell 2% year on year, totalling 1.8 million tonnes.

December figures have only been published for a few individual countries. In France there was a 4% increase in pig slaughterings, although this partly reflects an extra working day this year. Among the smaller producers December is the peak month for pig meat demand in Romania and slaughterings showed a large increase of 12% compared with December 2012 while there was a smaller increase in the Czech Republic.

Seasonal recovery in EU pig prices could be shortlived?

Following the fall in the last quarter of 2013, the EU average pig reference price continued to decline early in the New Year but has since shown some recovery and in the latest week, ended 2 February, it stood at €164.30 per 100kg. This is broadly in line with the normal seasonal trend of falling prices during much of January followed by strengthening from late January onwards. For the latest week, pig prices were around €5 per 100 kg lower compared with the same period in 2013 and over €30 per 100kg lower than the peak in early September. It is worth noting that these prices would have been set before Russia’s blocking of imports of EU pork became apparent which is now putting downward pressure on EU prices. Provisional data published by AMI for the week commencing 10 February indicate a fall of €7 per 100 kg in the German pig price with slightly smaller reductions in several other major producing Member States.

Since the turn of the year, finished pig prices have been broadly stable in most member states but, as expected, January averages stood below the previous month. Amongst the key countries, prices fell sharply month-on-month in Germany and the Netherlands, by €10 and €11 per 100kg respectively. Italian prices remained strong and stable, showing little sign of the post-Christmas decline in the EU market. Falls in the other key member states ranged between €4 and €8 per 100kg. For the week ended 2 February, the UK reference price had fallen €5 since the last week of December; the strengthening pound prevented further declines in the UK price in euro terms. As a result, the gap between the UK and the EU price remained at over €30 per 100 kg in the most recent week.

Feed market update

After holding above the £155/t level for the last 5 days, May-14 feed wheat futures slipped below this level on 12 February and so essentially undone half of the mini price rally seen since late January. A key event this week has been the release of the monthly USDA world supply and demand estimates. For the global maize market, a major feature is a higher feed demand forecast, up 58Mt on the previous season, as global demand growth returns to its long-term trend following the limited availability and high prices of 2012/13.

For wheat, the USDA reduced US end season stocks to 15.19Mt compared with 19.54Mt at the end of last season, although good supplies in Canada and Australia are seen to be offsetting the US reductions this year. In Europe, lower sales to other EU countries have led to an increase in French wheat stocks.

The protein meal market remains dominated by prospects for South American crops. Dry weather concerns in Brazil and tight US supplies have caused the US soyabean futures to rally back to levels not seen since late December. In the UK, Hi-Pro soyameal (ex-store, East coast) reached £384/t on 7 February, up £17/t on the week and again the highest level since late December. Despite the current dry weather, the USDA has increased its estimate of Brazilian soyabean production by 1Mt to 90Mt, up 10% on last year’s record crop.

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

Producer share of retail price remains high

GB finished pig prices have fallen since the turn of the year and prices in January averaged 167.91p/kg. This was around 3p lower than in December. According to figures collected by AHDB Market intelligence, the average retail price for pork fell marginally over the month. This meant that producers received 42% of the retail price, down one percentage point on December but up compared with the same month last year. Retail prices for bacon have not yet been published for the whole of January but December’s figures showed an increase from the previous month. As a result, producers received 37% of the retail price for bacon pigs, down from November but up on the 36% in December 2012.

The fall in retail pork prices between December and January was mainly due to a 4% fall in price for boneless shoulder and a 1% decline in cuts including loin chops, diced pork and fillet end leg. Loin steaks and boneless leg were more expensive, however. Compared with a year earlier, retail pork prices were generally higher for all cuts, with the biggest increase recorded for diced pork. In contrast, the smallest increase was recorded for boneless shoulder, with rises for different cuts varying between 1% and 9% over the year.

Shift in make up of animal feed

Latest figures from Defra confirm the expected substitution of barley, oats and maize for wheat in animal feed. In the final quarter of 2013, the amount of wheat used in production of compound feed was 58,500 tonnes lower than in the same period of 2012. Use of wheat feed and other cereals by-products was also lower. In contrast, 57,700 tonnes more barley was used by compounders, along with an extra 10,300 tonnes of oats and 33,700 tonnes more maize. There was generally lower use of oilseed cake and meal, although slightly more rape meal was used. Around 12% less soya meal and cake was included than in the final quarter of 2012.

Overall animal feed production during the quarter was down on a year earlier for the first time in two years. This contrasted with the situation during the first nine months of 2013, when output was up 9%. Pig feed production was more stable, with volumes in the final quarter only marginally lower than a year earlier. The amount of pig feed output during the year as a whole was also almost unchanged from 2012. Once again, less breeding pig feed was produced than a year before but the rate of decline fell to 2% in the final quarter. Finisher feed output was marginally higher, while 5% more grower feed was produced.

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