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AHDB Pig Market Weekly

15 May 2014

AHDB Pig Market Weekly - 15 May 2014AHDB Pig Market Weekly - 15 May 2014

In its latest Pork Quarterly report, Rabobank forecasts that pork shortages will be a concern in many countries in the coming months. This is largely the result of disease issues, principally the outbreaks of Porcine Epidemic Diarrhoea virus (PEDv) in the Americas and Asia.


Rabobank forecasts ‘Not enough pork to go around’

The report suggests that this is likely to lead to a decline in global pork production this year, although this is a more pessimistic view than that presented by the recent USDA global outlook, which predicted a small increase. These supply shortages are likely to keep prices high, notably in the US, where they have reached record highs this spring.

The tight global supply situation is being exacerbated by Russia’s ban on EU pork imports, which has increased its demand for pork from other exporters. The PEDv situation has meant that the EU has been able to find markets, mainly in Asia, for much of the pork which would previously have gone to Russia. Coupled with lower supplies and robust consumer demand, this has mitigated the effect of the Russian ban. Therefore, only in China are supplies plentiful, with low prices meaning producers are losing money. As a result, high sow liquidation is adding to the current over-supply but this could mean tighter supplies (and better prices) ahead, providing opportunities for global exporters in the longer-term.

For further details about Rabobank’s Pork Quarterly report, click here.

Contrasting developments in exports from the US and Canada

For the United States, in spite of the PEDv outbreak contributing to a 3% decline in slaughterings, pork exports increased by 14% in the first quarter of 2014 compared with a year earlier. Reports suggest the increase was partly due to the release of pork from cold stores, with stock levels very high in anticipation of supply shortages later in the year.

Mexico increased in importance as the primary buyer, with a 29% market share as US shipments were up 31%, despite a 14% increase in the price. Almost 75% of this trade consists of hams and shoulders. In contrast, shipments to Japan were down by 5% year on year, which can be partly attributed to increased competition from EU product. However, there was higher demand for US pork from some other Asian markets, namely China, to which shipments more than doubled from last year's low levels, and South Korea. The value of exports between January and March this year totalled $1.2 billion, up 14% on the same period last year, as the average export price was unchanged in spite of rising US pig prices during the course of the first quarter.

In contrast, Canadian pork exports declined by 2% compared with the first quarter of 2013. The US is the largest market for Canadian pork and shipments were up 1% on the year. However, similarly to the United States, Canadian exports to Japan declined by 10% year on year. On the other hand, Russia continued to purchase more from Canada as shipments, at 35,700 tonnes, were up by 44% on a year earlier and the highest first quarter figure on record. Increasing trade with Russia is a direct consequence of the import restrictions on EU and US product. The value of exports from Canada amounted to C$711 million, up 12% year on year.

UK pig prices

The EU-spec DAPP edged up to 164.01p per kg for the week ended 10 May, up 0.11p on the week before. This was the highest finished pig price since mid-February. This came despite the short week for the Bank Holiday but demand may have been boosted by the favourable weather conditions. However, despite the latest uplift, the annual gap has continued to narrow, with the DAPP currently only 1p higher than the same week in 2013. The weekly throughput estimates from AHDB/BPEX dropped to 149,000 head due to the Bank Holiday. This was only 1% lower than a year previously but was a week-on-week decline of almost 10,000 head. It represents the lowest weekly kill since the week of New Year, indicating supplies remain relatively tight. Carcase weights during the week edged down to 80.02kg, still up nearly a kilo compared with the same period in 2013.

The GB APP for week ended 3 May was up 0.20 to 165.77p/kg. This was 1.9p higher than the DAPP for the same week. As it is now just over a month since the APP was first published, it is clear that, for now at least, it is higher than the DAPP, with the gap ranging between 1.2 and 2.2p/kg so far.

For the week ended 10 May, the 30kg weaner price dropped by around £2 to £55.53 per pig. There is still some week-on-week volatility in the reported price but the market is broadly stable overall, in contrast to the normal seasonal trend for rising prices at this time of year. This meant that breeders received £6 per pig more compared with the same week in 2013. In contrast, the 7kg weaner price edged up to £40.38 per pig but remained below January levels, when prices were around £43 per pig.

Producer share of retail pork price continues to fall

According to the latest figures collected by AHDB/BPEX, in April, producers received an average 40% of the total retail pork price. This was 1% down compared with the previous month and 2% since the start of the year. The declining producer margin is a result of the retail price increasing at a faster rate than the farm gate price. The latest price spread calculations showed that the producer share of the retail price was at its lowest level since August 2012. Producers were in a better position in April last year, when their share of the retail price was 42%. Final bacon price figures for April are unavailable but the share of the retail price received by producers in March, of around 37%, remained unchanged compared with both the previous month and March 2013.

Retail pork prices generally remained strong in April compared with the same month in 2013. Traditional pork sausages and minced pork were the only two categories whose prices are monitored which recorded year-on-year declines, of 3% and 1% respectively. The largest increases were recorded for loin chops (up by 15%) and diced pork (up 10%), while price rises for other cuts ranged between 1% and 5%. The month-on-month changes in retail pork prices showed a mixed picture. Loin chops and diced pork prices strengthened by as much as 15% and 6% respectively compared with March. In contrast, prices for traditional pork sausages and minced pork came down by 6% and 4% respectively. In addition, there were smaller falls for boneless leg (down 1%) and boneless shoulder (down 2%).

Feed report

May-14 UK feed wheat futures closed substantially lower at £157/t on Tuesday, down £10.40 from the previous week. New crop (Nov-14) UK wheat futures fell £6.30 over the week to £152.50/t, while Paris Nov-14 maize fell £5.46 to £153.03/t. Friday’s USDA supply and demand estimates showed an increase in maize production, with positive forecasts for the 2014/15 season adding further weakness to prices. Maize planting in the US, the world’s largest producer, progressed rapidly last week to move ahead of the 5-year average pace, alleviating markets’ fears of delayed planting. 79% of maize was planted in Ukraine as of 8 May, indicating a rapid pace similar to last year. However, with access to finance for key inputs restricted, a 5-6Mt drop in production is likely next season.

UK (Hi pro, ex store, East Coast) soyameal prices as of Friday were little changed on the week at £367/t while rapemeal prices (ex-mill, Erith) fell £15 to £209/t, moving both protein meal prices to their lowest levels in 5 months. China’s government started selling soyabeans from state reserves from 13 May. The auctioning of soyabeans from reserves is likely to reduce the need for imports.

For a summary of the latest USDA supply and demand estimates and DEFRA UK cereals usage data, click here.

French export growth slowed in the first quarter

In the first quarter of this year, French pork exports totalled 118,600 tonnes, almost 1% up on the previous year. However, exports grew at a slower rate in comparison with the last two quarters of 2013. While supplies to other EU member states were 1% higher, exports to non-EU markets remained unchanged, accounting for just over a fifth of total trade. Italy was the key destination for French pork and supplies were up by 5% year on year, making up just over a quarter of total exports. In contrast, demand from the UK and Spain declined by 1% and 12% respectively. Among non-EU markets, exports to China came down by 10% on the year while trade with Russia suffered due to the ASF-related ban imposed earlier this year. However, these falls were offset by a doubling of shipments to South Korea. Despite a small increase in volumes, the value of exports in the January and March period totalled €217.3 million, down 3% on the year as a result of lower prices.

French imports, on the other hand, declined by 2% in the first quarter of this year, compared with the same period in 2013. However, last year’s figure was higher than in previous years and the latest quarterly figures showed imports at a ‘normal’ level. Spain and Germany are the main suppliers of pork, dominating the import market, between them making up around 85% of the total. Imports from Spain and Germany both declined, by 3% and 2% respectively. In contrast, Denmark supplied almost double the amount from January and March period in 2013. The total value of imports in the first three months of this year amounted to €227.9 million, 2% lower than in 2013, as unit prices were only marginally down.

Pig feed production up

According to latest figure from Defra, GB production of compound pig feed in the first quarter of 2014 was 3% higher than a year before. This was the first year-on-year rise in output since the first quarter of last year. There were similar rises for growing, finishing and breeding pig feed. This suggests that the pig herd has stabilised following the decline which happened during 2012 and early 2013. The increase in pig feed output contrasted with trends for other types of animal feed, overall production being down by 3%, with less ruminant feed, in particular, given better seasonal conditions.

Given the reduced harvest last year, it is no surprise that 13% less wheat was used in all animal feed production during the quarter (figures for individual species are not available). This shortfall has been replaced by increased use of barley (up 30%), oats (up 86%) and maize (up 65%). Use of cereals by-products was also lower, dropping by 12% compared with the first quarter of 2013. In addition, less soya and rape meal/cake was used this year, partly offset by increased use of sunflower meal/cake.

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