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AHDB Pig Market Weekly

24 July 2014

AHDB Pig Market Weekly - 24 July 2014AHDB Pig Market Weekly - 24 July 2014

The Chinese pork import market strengthened in the first half of the year, with volumes up by 9% compared with the same period a year earlier.


EU holds a large share of Chinese imports

The latest figures showed pork imports at a record high for the first half of the year. A large proportion of the pork supplied to China was from the EU, holding almost 60% of the market, but shipments from the EU remained relatively stable compared with last year. However, this was a considerable rise in comparison to the volumes recorded in the first half of 2012.

The US remained the leading supplier of pork to China and trade strengthened by nearly 60%, despite the impact of PEDv, although it remained well below the levels recorded in the first half of 2012. Among EU suppliers, imports from Spain and Denmark rose by 41% and 9% respectively but there was lower availability (down 34%) from the Germans. By June, US shortages were starting to impact on trade, with volumes from there down by 14%, while EU shipments were up 5%, increasing its market share to 65%. While the UK accounts for a smaller market share, around 5%, the latest figures indicate progress, as China imported 43% more UK pork compared with 2013. The value of pork imported by China between January and June rose by 8% to RMB 3.4 billion (£335 million).

Offal imports, on the other hand, weakened by 3% in the first half of the year, to 383,200 tonnes. This was a direct consequence of lower supplies from the EU, where Danish and German volumes came down by 7% and 46% respectively. Chinese buyers continued to purchase pig offal from the US, up by 7% and the leading supplier in this category too. This meant the first half value of total offal imports amounted to 4.1 billion RMB (£395 million), down 12% on a year earlier.

UK June slaughterings well up

At 771,700 head, UK clean pig slaughterings in June increased by 4% compared with the same month in 2013. This was the largest year-on-year growth in two years. The latest rise in throughputs suggests further productivity gains but may also mean that some pigs were marketed a little earlier, given good growing conditions and the falling finished pig prices of late. The number of pigs that entered English abattoirs increased by 4%, while there was a smaller rise in Northern Irish throughputs, up by 2% on a year earlier. Scottish slaughterings were up by 7%, the first year-on-year rise since the closure of Halls of Broxburn in October 2012. This brought the total UK kill for the first half of the year to almost 5 million head, up 1% from same period in 2013.

In contrast, there was a 7% decline in the number of adult sows and boars slaughtered in June, to 18,700 head. The six month figures for adult pig slaughterings showed a tight supply situation as cull prices remained subdued; throughputs were down by 3% on the year before. Finished pig carcase weights for June edged down slightly from the previous month, at 80.0kg. This still meant pigs in the UK were 2% heavier in the latest month, compared with June 2013. Consequently, pig meat production in the month totalled 64,500 tonnes, up 6% on a year earlier. The half year figure for pig meat production showed a 3% increase in supplies, to 418,900 tonnes.

UK pig prices

At 161.68p per kg, the EU-spec DAPP fell to the lowest point since April 2013 for the week ended 19 July. Falling pig prices are not unusual at this time of the year, as a factor of subdued demand as we enter the holiday season. This year, this has been combined with lower prices in the main EU member states, including Germany, France and Spain. With the latest quotation, the average price fell further below the previous year’s level, with the gap up to 7p. A 1% year-on-year increase in pig throughputs, at an estimated 165,200 head, added further pressure to finished pig prices. For the first time in four weeks, the average carcase weight increased, to 79.04kg, despite the hot temperatures of late, which may have had some impact on growth rates.

The SPP mirrored the DAPP, whereby prices fell by just over a penny to 161.48p per kg for the week ended 19 July, its lowest level and largest weekly drop since the series started in April. The APP for the week ended 12 July stood at 164.87p per kg, slightly up on the previous week. This meant that the difference between the APP and the SPP for the same week increased to 2.32p.

For the week ended 19 July, the price of a 30kg weaner fell for the second consecutive week to £55.25 per head, following the trend in the finished pig market. This was the lowest price since February this year. The latest price showed a week-on-week decline of 11p but breeders still received around £2 more than for the same week last year. In contrast, the 7kg weaner price edged up slightly to £40.58 per head, rising by around 50p since the previous week. However, the 7kg weaner price was around £2 lower compared with the same week in 2013.

Highest May UK pork exports since 2000

The UK’s pork export market performed strongly in May, with shipments up 19% on a year earlier at 16,200 tonnes, the highest May monthly figure since 2000. This came despite a strengthening pound, indicating some preference for UK pork, both on European and international markets. Exports to other EU members increased by 9% but supplies to the leading EU market, Germany, slipped by 12% compared with a year earlier. Shipments to China reached 2,600 tonnes, more than double their level in May 2013 and a swift reversal from the decline in the previous month. UK offal exports, on the other hand, declined by 19% on May 2013. The decline was mainly due to lower shipments to the EU, down from 1,460 tonnes in 2013 to 650 tonnes in 2014. China, however, imported 60% more UK offal, doubling its importance in the UK offal market.

At 30,500 tonnes, pork imports in May were only marginally up on the previous year. There were lower imports from the three main suppliers, Denmark (down 5%), Germany (down 1%) and the Netherlands (down 8%). Together, these three markets represent just under two thirds of UK imports. However, the declines were offset by increases from smaller markets, including Belgium, Spain and France. Partly as a result of the stronger pound, the average import price fell by just over 2%, which brought the total value of supplies down by 2% to £61.3 million. Bacon imports rose by 10% in the month, with higher quantities from Denmark, in particular. Similarly, sausage supplies rose by 5% on May 2013 but imports of other processed pig meat declined by 6% year on year.

EU pork exports return to growth

At, 132,800 tonnes, EU pork exports in May were marginally higher compared with 2013. This represented the first year-on-year rise since the Russian ban on EU pork imports was imposed in February. The export market held up well despite the loss of the Russian market, which took around 28,500 tonnes of EU pork in May last year. In the latest month, Japan replaced China as the primary market for EU pork exports. Shipments to Japan almost doubled in May, to 35,800 tonnes, while supplies to China came down by 9% compared with a year earlier. Part of the surplus was picked up by South Korea and Hong Kong, with increments of 40% and 13% respectively. Many smaller markets also took greatly increased volumes of EU pork, with the high-value US market almost doubling in size. The value of EU pig exports in May increased by 3% to €319 million.

Similarly, pig offal exports rose marginally in May, to 90,000 tonnes. As usual, the majority of the offal was destined for China and Hong Kong. Trade with China strengthened by 3% on the year earlier but Hong Kong lost some significance in the EU market, albeit remaining the second most import market after China. Strong performance in smaller markets, mainly in Asia, accounted for most of the growth, offsetting the loss of the Russian market. The value of offal exports in May totalled €98.9 million, down 5% on a year earlier.

Feed report

Favourable growing conditions and strong supply prospects for new season crops have continued to exert downward price pressure on grains throughout the last week. Nov-14 UK feed wheat futures closed at £127.65/t on Tuesday, down £1.15 on the previous week but up from the contract low of £127.05/t which was set on Monday. The headlines from Ukraine towards the end of last week provided some support to prices but this was only temporary and prices have been forced lower again as supply fundamentals outweigh any concerns over disruptions to grain exports from the region. Chicago maize nearby futures prices are currently the lowest in 4 years and the fall in global maize prices has led the EU Commission to reinstate import duties, which have been set at zero for four years.

The oilseed complex has also been influenced by bearish factors throughout the last week, with favourable weather and strong supply prospects putting pressure on prices. Paris rapeseed futures (Nov-14) closed at €322.25/t on Tuesday, a week-on-week decline of €8 but up by €6.25 on the contract low of €316.00/t which was set on Monday. Nov-14 Chicago soyabean futures prices settled at $388.62/t on Tuesday, a fall of $10.47 on the week. UK Hi-Pro soyameal prices were £310/t as at 18 July, down £5 from the previous week. UK rapemeal prices were £157/t at 18 July, a week-on-week decline of £6.

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

PEDv hitting Japanese pig producers hard

According to latest information from the Japanese Ministry of Agriculture, the number of PEDv cases in the country since the first outbreak in October has reached more than 800. This is around 15% of all pig farms in the country and it is now starting to have a significant impact on the pig market in the country. May slaughterings were 7% down on a year earlier, following a 4% fall in April. Supplies are expected to remain tight through the rest of this year. With carcase weights little changed, pork production was down by a similar proportion. One consequence of this has been a sharp rise in wholesale prices, which were around a third higher than a year earlier in June. So far, there has been a much more modest rise in retail prices but further upward pressure is likely.

With domestic pork in short supply, Japan, already the world’s leading pork importer, is likely to buy much more than in previous years. With US supplies also reduced by PEDv and Canadian exports redirected to Russia, the EU is likely to be the major beneficiary. Japanese trade data show a 19% rise in imports from the EU in the first five months of this year, the major contribution to an 8% rise overall. Latest EU export data (see above) indicate that the pace accelerated further, with shipments to Japan in May almost double their level a year earlier. This is making a major contribution to mitigating the impact of the Russian ban on EU pork and has helped to keep EU pig prices relatively firm.

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