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AHDB Pig Market Weekly

07 August 2014

AHDB Pig Market Weekly - 7 August 2014AHDB Pig Market Weekly - 7 August 2014

From this week, it will be even easier to keep up with the latest news and analysis on the pig market through the BPEX website.


Pig market news now on website

All of the stories from Pig Market Weekly will now be published first on the new market news section, along with more detailed analytical pieces of the kind which appear in our monthly publication Pig Market Trends. This will mean that news will be available quicker, often on the day when data is published, rather than having to wait until the following Thursday. Stories will also be available to everyone, not just those subscribing to the publications. Pig Market Weekly will still come out every Thursday morning and will include all of the stories published on the website in the previous week.

Russian ban hitting some EU countries hard

Although EU pork exports in the first five months of this year were down overall, trends varied considerably between Member States, according to figures from the EU Commission. This is illustrated by the two top exporters. German shipments were down by 20% on the same period last year, while Denmark exported 6% more, allowing it to regain its position as the leading source of EU pork exports. In part, this reflects Germany’s somewhat higher level of exposure to the Russian market; last year it accounted for 29% of German exports to non-EU countries, compared with 24% of Denmark’s. However, it also reflects the Danish industry’s ability to quickly redirect product to a range of other markets. Among other major exporters, the Netherlands also recorded increased shipments in the period, while French and Spanish shipments were little changed from last year. Unsurprisingly, Poland was the hardest hit, with its pork exports down by nearly half.

Russia was also a major market for EU fats and offals, which means that shipments were down by 10% overall. They fell by as much as 42% for lard, the most important product in the category, as Russia accounted for nearly three-quarters of EU exports last year. The impact on total fat and offal exports was more evenly spread between Member States, with the exceptions of Poland (down 38%) and the Netherlands (up 14%).

UK pig prices

For the week ended 2 August, the GB SPP fell below the 160p per kg mark for the first time, with its largest week-on-week decline of 1.30p per kg. The SPP is now at the lowest point since the series began, at 159.64p per kg. While weaker demand during this time of the year is a factor contributing to the recent falling pig quotations, the subdued EU market also continues to exert some downward pressure on the market. The DAPP recorded a similar trend, whereby the weekly average fell to 159.56p per kg, below 160p for the first time since April 2013. However, it is worth remembering that it only passed above this level for the first time as recently as November 2012. During the week, the AHDB/BPEX estimate of slaughterings totalled 169,000 head, 2% higher than the same week in 2013. Given the lower demand, these higher supplies will no doubt have weakened finished pig prices further. Carcase weights for the week ended 2 August fell marginally to 79.07kg, as expected during the summer period, although pigs were around 260g heavier than a year before.

The APP for the week ended 26 July was also at its lowest point to date, falling by 0.91 to 162.96p per kg. This is just over 2p higher than the SPP for the same week.

The 30kg weaner price weakened by almost £1 on a week earlier, standing at £56.07 per head for the week ended 2 August. Despite the fall, the weaner market remained firm compared with the same week in 2013, when prices were almost £3 lower. In contrast, the 7kg weaner market edged up to £40.19 per head for the same week. However, breeders received a lower market price (79p less) compared with a year earlier.

PEDv leads to higher Japanese imports

At 397,500 tonnes, latest figures published by Japan’s Ministry of Finance show pork imports increased by 10% in the first half of 2014, compared with same period in 2013. This was the highest point since 2008 for this period of the year. The increase was largely a result of higher Japanese demand in the second quarter of the year, when the impact of the country’s PEDv outbreak was more evident. The Japanese pork market was largely unaffected when the disease was first discovered but, as has been the case in the US, after several months lag, supply shortages and, consequently, price increases became prominent around April this year. In the first six months of the year, the value of pork imports totalled ¥215.8 billion, up 14% compared with the same period in 2013.

The US remained the main supplier of pork to Japan but volumes imported decreased by 3% year on year. A similar tight supply situation in the US contributed to higher export prices, hence encouraging Japanese buyers to strengthen trade with the European Union. This came as the Russian ban placed on EU pork imports left excess supplies on the market. As such, imports from the EU increased by 26% during the first half of the year, with the market share also rising by four percentage points year on year, to 35%. Denmark, Spain, and the Netherlands were amongst the main EU contributors. Canada, Mexico and Chile also supplied more pork to Japan during the six months.

EU sow prices below 2013 levels

Since the recovery in EU sow prices during early spring, the market has generally weakened again. This now means sow prices across the EU have once again fallen below year earlier levels. The German M1 sow price has fallen by 12 cents since the €1.42 per kg peak in mid-April, to stand at €1.30 per kg for the week ended 27 July 2014. At the latest price, the German sow quotation showed the largest year-on-year decline, of 12 cents, since the beginning of this year. Given the UK’s close sow export links with Germany, this is likely to have led to falling GB sow prices. In addition, the strengthening pound will have worsened the situation, as competitiveness of UK sow meat is reduced on the EU market. Industry reports confirm that GB sow prices have dropped since the start of the year, with suggestions that more sow meat is making its way to cold stores rather than the export market.

Prices followed a similar trend in Denmark, where falling sow prices this year have contrasted with rising prices a year ago. For the week ended 27 July, the Danish sow price stood at €0.90 per kg, around 25 cents below last year’s level for the same week but showing some signs of stabilising of late. Prices in the Netherlands continue to track German prices closely, albeit at a lower level, currently standing at €1.02 per kg, 17 cents down on the year. In contrast, French prices have strengthened of late, rising from €1.13 per kg in mid-May to €1.25 in the latest week, closing the gap to the German price from over 20 cents to only five, only two cents lower than a year ago.

Feed market update

The recent trend of falling prices in grain markets has persisted throughout the past week. In their latest monthly estimates, the International Grains Council (IGC) increased their forecast for global production of maize and wheat. This brought further bearishness to the grains futures markets, with new contract lows reached for Nov-14 UK feed wheat futures (£122/t) and Dec-14 Chicago maize futures ($142.62/t), when the markets closed on Friday. While Nov-14 UK feed wheat futures prices have recovered slightly, nearby prices are still the lowest since July 2010. Repeated rainfall throughout Europe this summer has damaged wheat crop and caused concerns about quality. Subsequently, it is becoming increasingly likely that there may be more feed wheat in the EU this year at the expense of milling wheat, which could apply further downward pressure to feed wheat prices.

Oilseed futures prices eased during the week but remained above contract lows of two weeks ago. However, USDA data suggest that lower prices appear to have stimulated demand, with new crop sales of US soyabeans at unprecedented levels. Last week, Strategie Grains increased their EU rapeseed output forecast for 2014/15 to 22.9Mt, 8% higher than last year. As at 1 August, UK Hi-Pro soyameal prices (Ex-store East-Coast, August delivery) were £321/t, up £7 from the previous Friday. UK rapemeal prices (34%, ex-mill Erith, August delivery) also followed the upward trend and increased by £2 on the week to £161/t.

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

Forecasts suggest less beef but more lamb

Latest AHDB/EBLEX forecasts for UK beef and sheep meat supplies, published this week, show that there is likely to be less beef but more lamb available later this year and into next. The fall in beef supplies could present opportunities to encourage consumers to switch to pork. Increased production, in both the UK and Ireland, has meant that prime beef prices have been under pressure since last summer; the average carcase price has fallen from around 400p/kg to 325p/kg during that time. The new forecasts suggest that UK production will stabilise later this year and fall in 2015, with similar trends expected in Ireland, the main supplier of imported beef. Exports have been subdued this year, as UK prices remain comparatively high, with the stronger pound contributing, and demand is weak. They could bounce back next year, if the improving economy leads to better demand. This would leave less beef available on the UK market and could mean that prices are firmer than they have been of late.

In contrast, sheep meat production this year is set to top 300,000 tonnes for the first time since 2009, thanks to strong growth in the second half of the year. A larger breeding flock and better seasonal conditions mean this year’s lamb crop is thought to have been significantly larger and carcase weights have been heavier. Despite a slight increase in exports and a modest fall in imports, they remain broadly in balance. Therefore, lamb supplies on the UK market are set to be higher for the rest of this year. Subject to weather conditions remaining favourable, a further slight increase in supplies is expected for 2015.

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