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AHDB Pig Market Weekly

19 June 2014

AHDB Pig Market Weekly - 19 June 2014AHDB Pig Market Weekly - 19 June 2014

Shoppers' spending on pork was down 4% year on year during March to May, according to the latest Kantar Worldpanel data.


Pork sales drop despite lower prices

The fall in sales was driven by declining expenditure on chops/steaks and leg roasting joints. Despite lower prices for these cuts, this did not translate into greater purchasing as volume sales also suffered, most notably on leg roasting joints, where sales fell by just over 20%.This has been led by a drop in promotional intensity in one of the major multiples and some consumers, particularly those shopping with the hard discounters, switching to chops/steaks. Despite these switching gains, volume sales of chops/steaks also fell, partly due to a shift from volume-driving X for Y promotions to price promotions. The one sector that continues to perform well is mince, which enjoyed volume growth of a fifth against a year ago. 

Spending on sausages was up 2% over the latest period, compared to a year ago. While growth came from all categories, standard sausages contributed some two thirds of the actual growth in value sales. The growth in the standard tier was driven by increased prices across most retailers, which did not impact on volume performance. Expenditure on bacon was flat year on year, with a 3% drop in volume sales being offset by an equal increase in prices. Shopper spend on ham was up 6%, driven in the main by increased volume sales in the discounters, where prices were down some 5% against a year ago.

UK importing more pig meat

The latest figures from HMRC show a 6% year-on-year increase in UK pork imports in April, to 29,200 tonnes. Supplies were up from the majority of key suppliers, with the exception of Denmark (down 11%) and Ireland (down 23%). However, these declines were more than offset by stronger trade with other EU countries. Imports from Germany increased by 14% on the year, making it the leading supplier for the second straight month, while shipments from the Netherlands and Belgium increased by 19% on a year earlier. Imports of bacon and ham also rose by 6% compared with April 2013, at 19,900 tonnes. Denmark and the Netherlands are the two main suppliers of bacon to the UK and in April the Danes led the market with a 19% increase, while Dutch volumes were 4% down on the year. There was a similar trend in sausages, imports of which rose by 12%, and other processed products, with volumes up 11% year on year. In both cases there was a rise in imports from Ireland, Poland and Germany but lower Dutch shipments.

UK pork exports showed a mixed picture in April, although overall shipments were almost unchanged at 15,100 tonnes. Germany continued to lead the market, with trade up by 31% on a year earlier, recording the highest April figure since 2008. However, after a record month in March, shipments to China were down by a fifth on the year, meaning Ireland displaced it as the second most important export market during the month. The drop in Chinese trade was replicated in other non-EU markets, with shipments down 23% overall. There was a clear downward trend for offal exports, a 35% decline compared with April 2013. The significance of UK offal declined further on the EU market, where volumes fell by 45% year on year. However, unlike other recent months, offal shipments to China/Hong Kong also came down.

UK pig prices

Having risen for the previous six weeks, albeit slowly, the EU-spec DAPP slipped back slightly in week ended 14 June, to stand at 164.15p per kg. Prices typically continue rising through June but subdued consumer demand this year has contributed to somewhat softer pig prices. Relatively low EU prices, exacerbated by further strengthening of the pound against the euro, have pulled in slightly more imported pork, which has also helped to suppress prices. The latest price is now around 2p lower than a year before, although it is worth remembering that it is still nearly 15p higher than at this point in 2012. According to the latest estimates, pig slaughterings during the week remained well below year earlier levels but this continues to be offset by heavier carcases.

The GB APP for week ended 7 June also fell back slightly. At 166.02p per kg, it was around 1.5p higher than the DAPP for the same week. This represented the second weekly fall in three weeks, confirming that the market has been finely balanced of late.

Despite the subdued finished pig market, both 7kg and 30kg weaner prices increased again in week ended 14 June, with the former reaching its highest level since early February at £41.99 per head. With feed relatively cheap and pig prices high in historic terms, there is evidently still some confidence among finishers. The 30kg average of £56.82 per head was around £5 higher than a year earlier.

EU pork exports still holding up

Despite the loss of their largest market, Russia, EU exporters continue to find alternative buyers for much of the displaced product. As a result, EU pork exports in April were only 9% down on the year, totalling 124,800 tonnes. This was achieved despite China, the second largest market last year, taking 9% less EU pork this April, while trade with Ukraine and Belarus also collapsed. These falls were largely offset by very strong growth in shipments to most other significant markets. Many were affected by PEDv, which either hit domestic supplies or reduced competition from US pork (or both). Among growth markets, shipments to South Korea and the United States more than doubled, while Japan took over 60% more EU pork. There was also solid growth to other Asian markets, such as Hong Kong, the Philippines and Singapore. Taiwan continued to emerge as an important market, taking 2% of shipments for the second consecutive month, as it too was hit by PEDv. With unit prices little changed in euro terms, the value of exports was also down 9% to €297.7 million.

Offal exports were only marginally lower than last April as, once again, alternative markets have been found for product which would previously have gone to Russia. The main buyers of EU offal, China and Hong Kong, both took slightly less this April. However, smaller markets in Asia and Africa took greatly increased volumes. Among them, shipments to the Philippines, Taiwan, South Korea, Cote d’Ivoire and Angola all more than doubled. Between them, these countries accounted for over 20% of shipments this year, compared with just 8% in April 2013.

Pigs provide higher share of English agricultural output

Last week Defra published data on Agriculture in the English regions for 2013. This shows a 14% increase in the output of pig production in England during the year, to total £1.06 billion, the highest figure since 1996. The increase was largely due to higher prices, although a small rise in production also contributed. The share of gross agricultural output in England which came from pigs rose from 5.2% to 5.6% during the year and they accounted for around 11% of all livestock output and 21% of output from meat production.

Pig production is highly concentrated in two English regions, the East and Yorkshire. Between them, they accounted for nearly 60% of output from pigs. In Yorkshire, pigs made up 13% of all agricultural output (40% of meat production), while in the East they made up 9% of the total and 30% of meat output. In other regions, they made up between 2% and 4% of total agricultural output, with the lowest share in the North West.

Similar figures from Scotland show that pigs made up 3% of agricultural output and 8% of output from meat production, with a total value of £81 million. This was down 3% on the year before despite higher prices, due to a sharp fall in pig numbers. Over 60% of Scottish pigs were located in the North East region (Aberdeenshire and Moray).

Feed market update

Grain markets continue to have a bearish tone, with risks to supply judged to be more than offset by the exceptional crop conditions in the EU and other areas. The UK feed wheat futures Nov-14 contract at £136.20/t on Tuesday was down £4.55 on the week. Paris maize futures have held steady for the past few days, although with the pound strengthening they declined £2.42/t on the week in sterling terms, putting greater downward pressure on the UK feed wheat market in order to remain competitive.

The USDA’s June update of the World Agricultural Supply and Demand Estimates showed small increases to both old and new season end-stock projections for maize, giving a bearish edge to grain prices. One of the key highlights from the report was that the new season (2014/15) global wheat production forecast is up by almost 5Mt, despite a notably smaller US crop, as production was revised upwards for India, the EU, China and Russia.

As at Friday 13 June, UK Hi Pro soyameal prices (ex-store, East Coast) averaged £352/t (June delivery), down £14 on the week, whereas rapemeal prices (ex-mill Erith, June delivery) were £3 higher on the week at £314/t. Last Wednesday’s USDA report showed relatively few changes at the global level for soyabean stocks. Brent crude oil futures prices last week rose to the highest levels since September 2013, making biodiesel more attractive.

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

Danish pork and pig exports rising

Despite the disruptions following Russia’s ban on EU pork, Danish pork exports rose by 3% in the first quarter of 2014, compared with a year earlier. In January-March 2013, Russia was Denmark’s second largest non-EU market, accounting for nearly a fifth of third country trade. Even so, 7% more Danish pork left the EU this year, with shipments to the leading market, Japan, up by nearly a quarter. Equally importantly, given that they accounted for three-quarters of exports, volumes to the rest of the EU were also higher by 2%. Shipments to Poland were down 13%, partly because it took more Danish weaners instead. The UK and Sweden also took slightly less Danish pork but most other markets grew. A slight drop in the average price meant that the value of exports was virtually the same as a year before at DKK4.56 billion (€611 million). Danish exports of cured and processed pig meat were also higher on the year, as were offal shipments, which were up 8% to 58,000 tonnes.

The growth of Danish weaner exports also continued in the early part of the year. The number of animals moved was 11% up on a year before, totalling 2.57 million head. There was also an increase in exports of slaughter pigs and breeding animals. Just under 60% of weaners were headed for finishers in Germany but this trade was down by 1%. Instead, the focus continues to shift towards Poland, with shipments up by a further 35% this year to nearly 800,000 head. Nearly 90% of weaners went to one of these two countries but there was good growth in sales to some smaller markets too, including Italy and the Netherlands. The weaner trade was worth DKK1.23 billion (€165 million) to Danish breeders during the quarter.

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