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AHDB Pig Market Weekly

27 February 2014

AHDB Pig Market Weekly - 27 February 2014AHDB Pig Market Weekly - 27 February 2014

UK clean pig slaughterings in January totalled 946,700 head, almost identical to the same month in 2013.


UK slaughterings steady but production up

UK clean pig slaughterings in January totalled 946,700 head, almost identical to the same month in 2013. Finished pig numbers remain constrained following the decline in the breeding herd during 2012. The number of pigs killed in England and Wales in January edged up marginally but Scottish throughputs declined by 8%. In contrast, slaughterings in Northern Ireland increased by 1% compared with the same month last year.

Adult pig slaughterings in the first month of the year totalledDuring the 12 week period to 2 February, consumers bought 1% more pork compared with the same period a year earlier, according to figures from Kantar Worldpanel. The increase in sales was, in part, driven by a small increase in the amount of pork sold on promotion, accounting for nearly half of total sales. This limited the overall increase in consumer spending on pork, which showed only a marginal increase on the year for the 12 week period. Increased demand for shoulder joints led the drive for pork, with consumers buying 6% more over the 12 week period. Other roasting joints also showed increased sales, as well as growth in demand for pork chops. With the exception of leg roasting joints, increased sales were made on promotion for all of these products. 24,600 head, down 3% from January 2013. While average GB sow prices are not available, trends in the EU market suggest that the GB sow price is likely to have weakened as of late. If this is the case, lower cull sow numbers may reflect producer reluctance to sell their animals, given the low returns available for doing so. The average clean pig carcase weight in January reached 81.20kg, up 2% from a year earlier and the heaviest on record. As a result, pig meat production during the month reached 80,500 tonnes. This was also 2% above the previous year’s level.

Pork sales rise, while trading-up supports sausages

Sausage consumers have been ‘trading-up’, with demand shifting from standard and economy ranges to higher quality premium sausages. Sales of standard and economy ranges fell by 3% and 14% respectively for the 12 week period, while premium sausages recorded growth of almost 1% compared with the same period last year. With little change in the quantity sold on promotion, consumers spent almost 10% more on premium sausages than last year.

Bacon sales have dropped over the 12 week period, with shoppers buying almost 4% less than a year before. With a fall in sales on promotion, there has been a 3% increase in the average price of bacon, resulting in only a 1% drop in spending. However, on a promising note, sales of British bacon increased over the period; consumers bought almost 5% more British bacon, with total expenditure increasing by 7%.

Ham figures continued to look encouraging, with volume sales up by 4% and spending up by almost 6%.

UK pig prices

The EU-spec DAPP fell further to 163.96p per kg in the week ended 22 February, its lowest level since early May 2013. The price was down almost 0.5p on the previous week and has now fallen for four consecutive weeks. Lacklustre demand continued to add pressure to the market, although compared with the same week in 2013 prices were still 8p higher. Throughputs during the week showed a small increase compared with the previous week and also remained up on a year earlier. Carcase weights edged up to 80.63kg and they were 0.4kg higher than a year earlier. The increases in the last couple of weeks are somewhat surprising since weights tend to decline during this time of the year.

Similarly, the 30kg weaner price continued to fall in the latest week, ended 22 February, even though volumes were well down. At, £54.64 per head, the average was down 40p compared with the previous week. The annual difference in the latest week remained at £8 per head. In contrast, the 7kg weaner market picked up slightly even though volumes traded were at their highest level for four weeks. Price for the week ended 22 February reached £41.50 per head, 58p above the previous week’s level.

Cull sow prices for GB are still not available but reports suggest a more a stable situation. In Germany, the main market for UK sow meat, the price, after having fallen by 6% in mid-February, has since stabilised.

Further fall in production costs

Latest AHDB/BPEX provisional estimates put the average cost of pig production in February at 144.7p/kg. This is over 2p lower than the estimate for January, as a result of a further fall in compound pig feed prices, which were at their lowest level in over two years. The latest estimate puts production costs 24p/kg below their level a year earlier, although they have been broadly steady since September, in line with the stable global cereals and oilseeds markets. Based on forward quotes for feed, costs are set to remain at similar levels until this summer’s harvest and could even fall further after that, if global weather conditions remain favourable.

With the DAPP currently still well above its level a year ago, producer margins remain positive. On average, they will make an estimated £16 per pig in February, a similar margin to January but lower than the levels through the closing months of 2013. Nevertheless, with pig prices well below the peak of production costs during 2012-13, producers relying on the spot market remain vulnerable to any increase in feed prices, due to weather or other factors.

Higher exports from the German market

German pork exports strengthened in 2013, at 1.7 million tonnes, the highest annual figure on record. This was 2% higher compared with 2012. The largest shares of exports were sent to Italy and Poland; these countries collectively account for just under 30% of total shipments. In 2013, exports to Italy increased by 6% on the year but 7% less German pork was shipped to Poland. Amongst the smaller buyers, supplies to the UK and Denmark increased by 11% and 28% respectively. The notable rise in the Danish trade resulted from Danish Crown moving some of its processing of pork to Germany. Trade with non-EU markets came down by 3%, with a particular impact from Russia, due to a partial ban on German exports. In addition, exports to China were also down by 2% compared with 2012. The value of pork exports in 2013 totalled almost €4 billion, up 2% on the previous year.

In contrast, pork imported by Germany decreased by 4% compared with 2012, to 941,900 tonnes. This was largely a result of declining consumption during the year, combined with a small increase in German pig meat production. Germany reduced purchases from all key suppliers, including Denmark (down 4%) and Belgium (down 2%) on the previous year. Imports from the Netherlands were down by 8%, largely because of a similar rise in German imports of Dutch slaughter pigs. The total value of pork imports fell to €1.77 billion, 5% lower than 2012.

Feed market update

UK feed wheat prices (May-14), after falling to a low point of £152.50/t on 13 February, have since rallied by £5 to £157.50 and remained at this level through to 25 February. There are relatively few fundamental drivers of any significance in the grain market at present. In the US the oscillating temperatures, which are expected to return to sub-zero next week, plus areas of dryness are leading the market to price in some weather risk. At the annual USDA conference, a fall in US maize plantings for 2014 was forecast in favour of soyabeans. In the Black Sea region, the main focus is the events in Ukraine. Although export activity appears to be largely unaffected, internal logistics could see greater impact. In Brazil, recent dry weather in some areas has caused concern for the second maize crop, although the majority of concern lies with the soyabean crop.

Global soyabean prices have shown continued rises in the last week, although on 26 February the market opened lower. In the UK, spot hi-pro soyameal prices (east coast) are approaching £400/t but rapemeal prices have been much more volatile. As has been the case in recent years, the February/March soyabean market is characterised by tight US stocks and growing reliance on the approaching Brazilian crop. As was seen last year, logistical bottle-necks are preventing the global market from fully exploiting the situation given the scale of the Brazilian crop. In addition this year there are some weather concerns.

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

French pork imports highest ever in 2013

Pork imports into France reached a record high in 2013, at 364,400 tonnes, up 2% on the year before. While domestic demand for pork in France remained broadly stable, higher imports were mainly a function of a small fall in production. Spain is by far the largest supplier of French pork, accounting for just under three quarters of the total, and shipments from this country increased by 3% year on year. Imports from other smaller markets also recorded increases, including Germany and Belgium. The total value of French pork imports rose by 5% to €941.9 million, mainly a result of a notable increase in the price of imports from Spain. France also imports over 50,000 tonnes of sausages and supplies rose by 3% year on year.

French pork exports increased only marginally in 2013 at 483,300 tonnes. The value of pork exports came down to €938.9 million, marginally below a year earlier. The rest of the EU is by far the main market for French pork, with a quarter of pig supplies sent to Italy alone, with a 1% increase on the previous year. While the UK is a much smaller market than Italy, pork exports to the country were also up, again by 1%. Non-EU exports account for just under a quarter of total French shipments and were up by 5%. Demand from China and Russia rose by 30% and 18% respectively compared with 2012 but shipments to South Korea and Japan were sharply lower. However, offal exports were down by 3%, mainly due to a 2% decline in supplies to China.

February Pig Market Trends out now

The February edition of Pig Market Trends was published on Tuesday. As well as the usual summary of developments in the UK and EU pig markets and the global feed market over the last month, this month’s issue includes more detailed articles on:

  • Outlook for UK pig supplies. With pig prices higher and production costs lower, producers are in a better position than a year ago. So, what does this mean for the UK market in the year ahead? This article looks at the outlook for the UK pig market and the factors which may influence it.

  • Christmas. The Christmas period is obviously a key period for retail sales. This year higher prices meant that consumers spent more on meat but the amount sold was lower. However, pork bucked this trend with more bought due to increased promotions, which also kept prices down. This article examines the trends at Christmas in more detail.

  • PEDV in North America. The PEDV outbreak in the US has spread increasingly rapidly since the onset of winter, with over 3,000 cases now confirmed. This is likely to have a significant effect on US production and exports, over the coming year. This article looks at the impact on the US pig sector and its potential global significance.

  • Denmark. As the leading supplier of imported pork to the UK, the Danish market is important to the UK industry. Denmark has traditionally been seen as the benchmark for an efficient pig industry but it has not been without its problems in recent years.This article looks at latest developments in the Danish market.

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