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AHDB Pig Market Weekly

21 August 2014

AHDB Pig Market Weekly - 21 August 2014AHDB Pig Market Weekly - 21 August 2014

For the fourth time in the first six months of this year, UK pork exports recorded double digit year-on-year growth in June.


Strong UK pork exports continue

With the exception of Germany, which was affected by the lower GB sow kill during the month, all significant markets recorded growth. Unusually, Denmark was the largest market during the month – presumably this was product for re-export, given strong Danish export sales to Asian markets. Exports to China/Hong Kong rose by 22% and there was also good growth in some smaller non-EU markets, such as Korea, Cote d’Ivoire and the Philippines. The June figures mean that total pork exports in the first half of 2014 reached 94,700 tonnes, 11% up on last year and the strongest first half performance since 2000. With lower unit prices, the value of exports during the six months was only 2% higher at £105.9 million.

In contrast, the UK imported less pork in June than a year before. Much lower shipments from Denmark and small falls for the two other major suppliers, Germany and the Netherlands, were largely offset by increased volumes from smaller suppliers such as Spain, France and Poland. However, the total volume of pig meat entering the UK market was higher, due to increased imports of bacon/ham, sausages and processed products. Imports of Danish bacon were noticeably higher, continuing the recent trend of more product being cured there before shipping, rather than being moved as pork, likely for curing in the UK. Across the first six months of this year, there was growth in imports across all the main pig meat categories. Overall, shipments were up 5% at 420,400 tonnes (shipped weight). As with exports, unit prices were slightly lower, helped by the stronger pound, so the value of pig meat imports rose by just 3% to £1.06 billion.

A larger Danish pig herd in July 2014

According to the latest figures published by Denmark Statistics, the Danish pig population at the start of the third quarter had increased by 2% on a year earlier, to 12.5 million pigs. The Danish pig industry recorded the largest third quarter pig herd since 2011, indicating a recovery from the recent declines. This was also 2% higher compared with three months earlier. The increase came on the back of a 1% rise in the female breeding herd, to just over 1 million head. In-pig sows and gilts increased by 2% but maiden gilt numbers came down marginally, suggesting any expansion in the near future will be modest.

The latest figures indicate a sizeable improvement in productivity, as piglet numbers were up by 4% compared with the same quarter in 2013. However, a large proportion of piglets are still being exported to Germany and Poland; Denmark reportedly exported 10% more live pigs in the first half of this year than in the same period of 2013. This meant slaughter pig availability was reduced, with the number of pigs between 50kg and slaughter weight down by 2% compared with 2013.

UK pig prices

For the week ended 16 August, the GB SPP fell further to 158.27p per kg, down by 0.91p on the week before. The latest finished pig price was 6p lower than the peak of the year so far at the end of May. There was a similar trend in the DAPP quotation, which fell to 158.35p per kg, with a widening annual gap, currently standing nearly 10p below last year’s level for the same week. While declining prices during this time of the year are normal, the latest declines in prices are partly a result of higher supplies. Over the last month, estimated weekly slaughterings were up by 4% on a year earlier, with this week’s estimate at 167,700 head. During the latest week, carcase weights stood at 79.10 kg, almost unchanged from a week earlier and only marginally higher than the same week in 2013.

The APP for the week ended 9 August fell to 161.83p per kg, down by 0.31p from the previous week. The GB SPP for the same week stood at 159.18p per kg, a difference of 2.65p per kg.

The 30kg weaner market recovered from the large drop in the previous week, standing at £55.56 per head for the week ended 16 August. Industry reports suggest weaner supplies were back to normal this week, after some disruptions in the previous week, with prices also reverting to more typical levels. With prices back up again, breeders received £2 per head more compared with the same week in 2013. In contrast, the 7kg weaner price fell to £38.56 per head, almost £2 below the previous year’s level for the same period.

The changing mix of UK pig meat exports

One of the reasons UK pig prices have reached new highs in the last couple of years is the strength of exports. Total pig meat shipments have risen from a low point of 111,000 tonnes shipped weight in 2003 to 259,000 tonnes last year. So far this year, exports have been higher still. Last year’s figure was equivalent to 27% of UK production, nearly double the share in 2003. With export growth exceeding the rise in production, it has helped to push prices from 105p/kg in 2003 to an average of 165p/kg a decade later.

Export growth delivers value to the UK pig industry in two key ways. First, it increases the overall demand for UK pig meat and diversifies the customer base. This helps to strengthen prices throughout the supply chain. Secondly, it provides markets for products for which there is little or no demand from the domestic market, thereby increasing the value of the carcase as a whole. Therefore, maintaining and developing export markets should continue to be a priority.

So what are UK exports made up of? To read our analysis of trends in UK exports, click here.

Canadian pork exports fall marginally

Canadian pork exports in the first half of the year came down marginally to 439,400 tonnes. The US remained the primary destination for Canadian pork and supplies increased by 3% on the year before as PEDv hit US production and led to increased demand for imports. Similarly, higher pork exports were shipped to other countries affected by PEDv, notably Japan and Mexico, up 6% and 8% respectively on a year earlier. Nevertheless, Russia replaced Japan in second position, as trade to the former doubled. The Russian ban on EU and US pork imports offered an opportunity to Canadian suppliers. However, the recent announcement that Canadian pork will also be banned will change this situation in the second half of the year. With prices significantly higher, other Asian markets reduced trade with Canada. Exports to China came down by a quarter, as its pork trade focused mainly with the US and EU. The sharp rise in prices meant that the value of pork exports in the first half of the year totalled C$1.55 billion, up 25% on a year earlier.

Live pig exports were down by 8% between January and June this year compared with 2013. Almost all of the Canadian live pig exports are destined for the US market and the long-term decline can be largely attributed to changes to US country of origin labelling rules. However, the value of Canadian live pig exports increased by 38% in the first half of the year to C$241.8 million, on the back of a sharp increase in the export price.

Feed market update

The grains market continues to be influenced by fundamentally bearish factors overall. During the last week, Nov-14 UK feed wheat futures closed below £122/t for the first time and settled at a new contract low of £121.10/t on Tuesday. However, the other main global grain futures markets have recovered slightly after dipping last week. The English area planted to wheat, at 1.8Mha, is 19% higher than last year, according to provisional results from Defra's June Census, released last Thursday. Areas planted to barley and oats declined by 14% and 23% respectively. UK trade data for June 2014 revealed the second highest volume of UK wheat imports since September, meaning the annual import of wheat was the second highest in records dating back to 1995/96. This, combined with the relatively early start to harvest and optimism towards the size of the 2014 grain crops, suggests not only an increase in production but also higher old crop stocks.

The oilseeds complex also remains bearish overall, as the focus continues to be on the current record production estimates for 2014/15. UK soyameal (Hi pro, Ex-store East Coast, August delivery) was £330/t on 15 August, up by £8 on the previous week. UK rapemeal (34%, ex-mill Erith, August delivery) was £160/t on 15 August, up from £157 a week earlier. The strong appreciation of sterling which was witnessed over most of 2014 to date has eased in recent weeks, which may have helped to add some support to UK soyameal prices.

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

EU pig meat production lower in May

According to the latest figures published by Eurostat, at 19.8 million head, EU pig slaughterings were down by just over 3% in May, compared with the same month in 2013. This was the largest year-on-year decline since the start of 2014. However, there was one less working day in the fifth month of this year, which meant that throughputs actually increased slightly from a year earlier on a per working day basis. Pig meat production in May declined at a similar rate compared with a year earlier, indicating some stability in carcase weights across the EU, although with some changes in individual Member States.

The country breakdown showed most of the major producers slaughtering fewer pigs in May. The largest year-on-year decline was recorded in Italy, down 16%, followed by France (down 9%). Irish throughputs were reduced by 5%, while the EU’s largest pig producer, Germany, recorded a 4% decline compared with May 2013. In contrast, pig slaughterings in Spain and Poland rose by 1% and 4% respectively. With prices in the EU stabilising again, early June figures, from countries including France, Ireland and Romania, showed increases in supplies, partly due to an extra working day this year, while Ireland recorded a larger 8% increase on a year earlier.

Book now for Grain Market Outlook

Bookings are now open for HGCA’s flagship annual Grain Market Outlook Conference. With grain prices at a four-year low and immediate prospects for harvest looking good, the conference on Tuesday 14 October at the Queen Elizabeth II Conference Centre in London, will give key insights into and new analyses of global markets. The conference will look at whether the industry needs to retune its perspective to respond to long-term influences motivating world markets.

Four speakers will present a full morning of detailed market analysis, with opportunities for the audience to question the experts after each paper. Starting off the day, Jack Watts, AHDB/HGCA Lead Analyst will present the 2014/15 Grain Market Outlook. David Jackson, Director of Oilseeds at LMC will follow with the 2014 Oilseed Market Outlook. Then, bearing in mind the market’s reaction to recent instability in the Black Sea region, Sergey Feofilov, General Director of UkrAgroConsult will speak on the importance and influence of Ukraine in global grain markets. Patrícia Luís-Manso, Agriculture Research Director for Platts, will give the final paper of the conference, speaking on the European ethanol market.

To book a place at the conference, click here.

Little change in French pork exports or imports

In the first half of the year, French pork exports totalled 233,000 tonnes, up marginally from the same period a year earlier. French exports to the main markets held up well, with Italy being the primary destination, accounting for a quarter of the overall trade. Pork shipments to Italy, the UK and Greece all increased by 4% year on year. These increases from the main markets helped to mitigate the impact of lower purchases from Spain (down 23%) and China (down 10%). The Russian ban on the EU was evident in the French January to June export figures, which showed an 84% drop in supplies from 9,600 to 1,600 tonnes. However, French suppliers were able to diversify into other smaller markets including Bulgaria, Philippines and Hungary. The value of French exports in the first half of the year totalled €433.2 million, down 1% on a year earlier.

French pork imports in the first half of the year declined by almost 1% on a year earlier, to 182,500 tonnes. Spain is the largest supplier, providing around 71% of total imports and shipments from the country were reduced by 2%, possibly a result of a small increase in the import price for Spanish pork. Any further falls were offset by steady volumes from Germany and a doubling of imports from Denmark, with a 12% drop in the Danish pork import price. The value of total pork imported amounted to €465.5 million in the first half of the year, up 1% from a year earlier. Despite lower volumes imported, the value of these supplies was higher than the income generated from exports, indicating a competitive French pork export price.

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