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AHDB Pig Market Weekly

10 April 2014

AHDB Pig Market Weekly - 10 April 2014AHDB Pig Market Weekly - 10 April 2014

According to members of the EU Commission’s working group on pig meat forecasts, pig supplies are set to tighten further in 2014.


EU supplies set to remain tight this year

The group’s figures suggest another 1% decline in slaughterings across this year compared with 2013, although the rate of decline may slow down in the second half of the year. This is supported by figures from January, which show a 4% year-on-year decline, with provisional figures from selected countries showing falls continued into February and March. Most of the major producing Member States are forecasting a decline in production. There are expected to be rises in piglet production in Denmark and the Netherlands but these will be more than offset by further growth in weaner exports. This will help to support slaughterings in Germany and Poland, among others, which would otherwise decline noticeably.

The group also suggested a relatively optimistic outlook for EU pig prices, which have been depressed in late 2013 and early 2014. Even without the Russian market re-opening, prices are expected to increase in the second and third quarter of the year, although not reaching last year’s heights. This is partly a seasonal development, as EU consumer demand increases and supplies tighten. However, it also reflects confidence about increased exports to Asian markets, given the likely shortage of US pork at competitive prices. Prices are expected to remain firm in the fourth quarter, with no repeat of last year’s decline. With demand already robust, if the EU does start to export pork to Russia again, prices could easily rise by a further 10-15%.

EU pig prices heading back up

EU pig prices were still falling at the start of March and averaged just under €156 per 100 kg during the month, down €5 from the month before. This was largely due to the impact of the Russian restrictions on EU pork imports. The monthly average price was €16 below 2013’s level for the same month; the gap has widened as prices normally increase at this time of the year. The EU pig market reached the lowest point for the year so far in early March at €151.39 per 100kg, over €20 below last year’s level. However, in the last couple of weeks, the impact of the Russian ban has started to fade away, as prices strengthened to around €159 per 100kg. This meant that the price differential between the EU and UK market narrowed from a peak of €40 to €30 per 100kg for the week ended 30 March. These rises came in response to favourable weather conditions, which stimulated consumer demand, and better prospects on Asian markets given the sharp rise in US prices. Nevertheless, the average price was still €12 lower than a year earlier.

Surprisingly, the recent recovery was most evident in Poland, where prices ended March €22 per 100kg above their low point and almost at the same level as in January, before ASF was confirmed. Poland has been free of new ASF cases for a month, as reported by the World Organisation of Animal Health; this could be a factor encouraging Polish prices as of late. Elsewhere, producer prices in France were €11 above their low point, while those in the Netherlands, Belgium and Germany had all increased by around €9-10 per 100kg. Similarly, Spain and Denmark recorded rises of €6 and €5 respectively. Ireland was one of the few countries where prices remained well below their level before the Russian ban.

UK pig prices

The EU-spec DAPP edged up for the week ended 5 April, to 163.07p per kg. Rising finished pig prices are normal at this time of the year but the upward trend has been somewhat delayed due to the difficulties in the EU market, which have added downward pressure on UK prices. This rise brings producer prices back to early March levels. There has been some closing in the annual gap and for the latest week, the pig price was only 4p per kg higher than the same week a year earlier. Estimated weekly throughputs for the week totalled 159,800 head. This was marginally lower on the week before but 1% higher than a year earlier. Carcase weights declined to an average of 80.35kg; this was the lowest point since the start of this year but 0.6kg higher than the same week in 2013.

The 30kg weaner market strengthened in the latest week, ended 5 April, to £56.89 per head. This meant the average price increased by £1.60 on the previous week. Higher DAPP quotations in recent weeks likely contributed to this increase. Industry reports suggest little change in the number of weaners traded and the price remains within the range of prices recorded recently. The 30kg weaner price remained £8 higher compared with the same period in 2013. The price of a 7kg weaner was also marginally up for the same week, at £40.92 per head.

Stable pork trade within the EU

The volume of pork traded between EU Member States amounts to over 5 million tonnes annually, far more than is shipped to non-EU markets. Last year, volumes were almost unchanged from 2012, despite a small fall in pig meat production across the EU. About 85% of shipments originate from just six Member States, with Ireland the only other Member State which exports more to the rest of the EU than it imports. Germany reinforced its position as the leading supplier to other Member States, with shipments up by 3%. Belgium was the only net exporter to send higher volumes to the rest of the EU in 2013.

The remaining 21 Member States were all net importers of pork from elsewhere in the EU, although Hungary, Finland and Austria were all net exporters when shipments to non-EU countries are taken into account. Seven Member States, including the UK, imported at least 100,000 tonnes more pork than they exported in 2012. Several smaller Member States import significant quantities of pork while exporting only very small amounts. Self-sufficiency was lowest in Malta, Greece and Bulgaria, all of which produced less than 40% of the pig meat they consumed.

Denmark, the Netherlands and Germany were the three leading exporters of cured pork products, with the UK their main market. All three recorded lower shipments in 2013. Italy and Spain are also significant exporters, mainly of speciality hams, but, while Italian shipments were lower, Spanish exports rose by a quarter. Germany and Poland were the two main suppliers of sausages and other processed pig meat products, with volumes little changed from 2012.

Chilean exports weakened in 2013

In 2013, Chilean pork exports totalled 120,300 tonnes, down 9% compared with a year earlier. The export market performed well in the first half of the year, when volumes shipped were up 2% on the year. However, this situation reversed in the second half of the year as supplies were reduced by almost a fifth. The downturn was largely a result of a sharp 34% fall in exports to South Korea, with its market share also down to 19% in 2013 from 27% in the previous year. South Korean import requirements fell in the latest year, given their pork production has now recovered to pre-FMD levels.

In contrast, Japan led the Chilean export market in 2013, accounting for just over a quarter of total exports. Supplies to Japan increased by 14% compared with a year earlier. Other than Korea, increasing demand for pork imports has generally been seen across the Asian markets; exports to China more than doubled, for example. Supplies to Russia fell by 15% year on year but exports to the country remained well above 2011 levels. The value of Chile’s exports came down by 12% compared with the previous year to $418.9 million.

Feed market update

May-14 UK feed wheat futures closed at £167.50/t on Tuesday, up £2.50 from the previous week. Chicago maize futures (May-14) settled at $199.60/t, as at Tuesday’s close, $0.20 down on the week. The USDA crop progress report resumed on Tuesday and revealed that 35% of the US winter wheat crop was in good/excellent condition, the lowest rating seen at this point in the year since 2002. Following the release of the report, Chicago wheat futures (May-14) closed $1.70/t higher than the previous session’s settlement price.

The May-14 Chicago soyabean futures contract closed at $544.70/t, slightly down on the week but $6.70 higher compared to Monday’s settlement price. On Saturday (5 April) a bulk shipment of soyabeans from Brazil arrived in the US and more are expected to follow in order to provide relief to the tight US supply situation. For next season’s harvest, analysts Agroconsult expect a further 1Mha of land in Brazil to be planted to soyabeans, although this is a slower pace of expansion than this season. The UK Hi-Pro soyameal price (ex-store East Coast) was £403/t as at Friday 4 April, £2 lower on the week.

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

Pork contributes to rising global food prices

According to the latest FAO Food Price Index, global prices in March were up over 2% from the previous month and were at their highest level since last May. Prices increased across all major food groups apart from dairy. The overall growth was led by sugar (up 8%) and cereals (up 5%). The rise in cereals prices was down to dry weather in Brazil and the USA, the strong pace of trade in grains and concerns about the political situation in Ukraine.

The FAO Meat Price Index rose by 1.5% during the month, although it is at a similar level to March 2013. The main driver was higher beef prices, as dry weather conditions affected production in Australia and the United States. Prices for pig meat also rose, in part over concerns about the effect of Porcine Epidemic Diarrhea virus on export supplies in the United States. US pig prices have risen by around 50% over the last few weeks, as supplies start to tighten and buyers have been stockpiling product in anticipation of supply shortages later in the year. Global prices of poultry and sheep meat were only slightly stronger in March.

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