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AHDB Pig Market Weekly

18 September 2014

AHDB Pig Market Weekly - 18 September 2014AHDB Pig Market Weekly - 18 September 2014


More pig meat entering UK but exports up too

More pork and bacon entered the UK from overseas during July 2014 than a year before, according to latest figures from HMRC. This, added to increased UK supplies, put downward pressure on pig prices. During the month, 31,500 tonnes of fresh and frozen pork were imported, which was 9% more than last July. Supplies from Denmark, the leading supplier, were up 20% but there was a particularly notable increase in French pork volumes, which were more than double last year’s level. This made France the third largest supplier in the month – it normally ranks fifth or sixth. In contrast, imports from Germany and Ireland were lower on the year. Bacon and ham imports were also up 9% year on year, with growth from all the major suppliers. Processed hams were also shipped in slightly higher volumes but there was a drop in sausage imports on the back of sharp falls in volumes from the Netherlands and Poland.

Pork exports also continued to grow in July, with shipments up by 9%, in line with the trend in the first half of this year. Once again, growth was led by China, with shipments up by more than half compared with July 2013, at 3,000 tonnes. Although much smaller in scale, there was also strong growth in trade with several other Asian markets; the Philippines, Japan and South Korea all took more than twice as much UK pork as last year. In contrast, exports to the rest of the EU were slightly lower than a year before. Lower prices meant that the value of exports during the month was only 4% up on the year, at £18.7 million pounds. Unlike most of the year to date, offal exports were also higher than a year before in July. However, this is mainly because shipments to the EU had already fallen away by this time last year, rather than there being any short-term improvement in trade. China/Hong Kong remains the dominant market, with a 60% share of exports, with shipments up by nearly half.

Lower prices drive higher pork purchases

Shoppers’ spending on pork was up 1% year on year during the 12 weeks to 18 August, according to the latest Kantar Worldpanel data. The average price for pork was down just over 4%, which helped consumers to increase the amount they purchased per shop. As a result volumes were up some 5% year on year. Pork mince continues to show strong growth, especially in the hard discounters, but consumers also bought a lot more roasting joints this period and, as a result, they accounted for almost a third of total pork sales. Indeed, all the main roasting joints achieved annual growth in excess of 20%, with shoulder the best performing cut. Nearly two-thirds of the actual growth in the amount of pork purchased came in the final 4 weeks, which would appear to have been driven by a promotion in one of the Big 4 Multiples. This provided vouchers offering £5 off when £10 was spent on meat and fish, which consumers could use in conjunction with their 3 for £10 offer. By contrast the amount of pork belly and chops/steaks purchased fell in the period.

Spending on sausages was flat over the latest period, compared to a year ago, as a small increase in prices was matched by an equal fall in the amount consumers bought. The standard sector remains in growth though but gains were offset by falling purchases of the premium sector, where average prices rose just over 5%. Shopper spend on ham was marginally down, though the hard discounters continue to perform well. Bacon fared better, with both expenditure and the amount purchased up by some 2%, with the hard discounters driving the growth.

UK pig prices

At 156.07p per kg, the GB SPP for the week ended 13 September continued on its downward trend, with a 0.84p decline on the week before. Falling prices in the European Union, triggered by weaker German prices, are likely to have added pressure on UK finished pig prices. The EU-spec DAPP fell to 156.34p per kg, down by 0.72p from the previous week and 13p lower than a year earlier for the same week. The AHDB/BPEX estimated weekly slaughterings stood at 172,700 head for the week ended 13 September. This was 4% higher than the same week in 2013, encouraging the falls in pig prices. Carcase weights fell marginally to 80.48kg but pigs remained around 790g heavier than the same week in 2013.

The APP for the week ended 6 September fell by 0.37, to 159.29p per kg. This meant it recorded a decline for the eighth consecutive week. The SPP for the same week stood at 156.91p per kg, 2.38p below the APP.

The 30kg weaner market edged down by 56p for the week ended 13 September, to £52 per head. This was £2 lower compared with the same week in 2013, indicating some ongoing weakness in the market, reportedly the result of a lack of available finisher accommodation. Despite reductions in feed prices, the 7kg weaner market also remains subdued in comparison to last year, when the declines in the feed market were not so evident. For the week ended 13 September, the 7kg weaner price stood at £38.83 per head, marginally higher than the previous week but almost £3 below the level a year earlier.

Herd expansion in key member states

Provisional results of pig censuses from some of the key EU member states generally showed a more positive picture than in recent years. Member states which have released figures so far include Germany, Denmark, the Netherlands and Italy. Lower feed prices this year have meant some producers were able to expand, resulting in a 1% year on year increase in overall pig numbers across these countries. In addition, total sow numbers increased on a year earlier, although there were slightly fewer gilts in the breeding herd. The member states which have reported so far represent just under half of the total EU pig herd and the overall situation will become clearer once figures from other major producers, such as Poland, France and Spain, are released in the coming weeks.

The German and Danish pig herds expanded by 1% and 2% respectively; the German and Danish census results have been analysed in previous editions. Overall pig numbers in the Netherlands were almost unchanged from last year but sow numbers increased by 1%. At the same time, total piglets rose by 2%, highlighting further productivity gains. In addition, maiden gilts numbers increased by 5% year-on-year, suggesting producer intentions to expand in the near future. In contrast, provisional figures for Italy indicate a 1% decline in total pig numbers and a 2% drop in breeding sows. A sharp reduction in gilt numbers (both in-pig and maiden gilts) suggests further declines ahead. Industry reports indicate a struggling Italian pig industry, resulting from animal health concerns and carcase utilisation challenges. Among smaller producers, the Hungarian figures show an increasing herd but pig numbers were lower in Austria and Romania.

EU pig meat output down in first half of 2014

With an extra working day in the month this year, EU pig slaughterings in June were 2% higher than last year at 19.2 million head. Nevertheless, this was the lowest monthly kill of the year so far and indicates that supplies remained tight across Europe. Overall, throughputs in the first half of the year were 1% lower than in 2013, totalling 121.3 million head. Pig meat supplies were tightened further by a small drop in carcase weights overall, meaning that production was up only 1% in June and was down 2% for the year to date, to 10.83 million tonnes. If sustained for the rest of the year, this would mark the third straight year of falling output across the EU; pig meat production in the 12 months ending in June 2014 was 3% lower than in the 12 months ending June 2011.

Although the overall trend was downwards, there were differing trends in the main member states in the first half of 2014. Among the larger producers, Poland, Spain and the Netherlands all recorded increased throughputs, with rises of 7%, 2% and 1% respectively. The Polish pig herd has begun to stabilise after a long period of decline but the rise in production is mainly due to increased imports of weaners. The live trade also impacted on Dutch figures, with more pigs slaughtered at home rather than being exported to Germany. This contributed to a 2% fall in German slaughterings in the first half of the year and the growing weaner export trade was also largely responsible for a 3% drop in Danish throughputs. During the six months, France killed 1% fewer pigs than in the first half of 2014, while the Belgian kill was down 2%.

Feed market update

UK feed wheat futures (Nov-14) closed at £112.60/t on Tuesday (17 September), down £5.45 from a week earlier but slightly higher than Monday’s settlement price of £112.00. The price collapse seen over the past week was largely due to the strong bearish message provided by the latest USDA supply and demand estimates released last Thursday. Global wheat production was raised to a record 720Mt, while world maize production was increased to a record 987.5Mt. Although global demand estimates were also increased for wheat and maize, these were insufficient to offset the rise in production levels, indicating a higher carryover of stocks into 2015/16.

The upward revision of global soyabean production by the USDA last week was more dramatic than the changes made to cereal production forecasts. A further 6.4Mt was added to last month’s estimate, bringing global soyabean output to a record 311.1Mt. Chicago soyabean futures (Nov-14) closed at $360.33/t on Tuesday, down $4.41 from a week earlier. As at Friday (12 September), Hi-Pro soyameal prices (ex-store East Coast, September delivery,) were £329/t, £6 lower on the week. Rapemeal prices (ex-mill Erith, September delivery were £167/t, £4 lower compared with a week earlier. Strong demand from China for US soyabeans in 2013/14 provided an appreciable level of support to prices but a possible fall in US exports to China this season could amplify the downward pressure on prices.
To read more about the latest developments in the feed market click here.

Global food prices falling but meat prices continue to rise

The latest food price index from the UN Food & Agriculture Organisation (FAO), covering August, fell for the fifth consecutive month, to 196.6 points. This marked its lowest point since September 2010. The average monthly food price index was almost 4% down from both the previous month and a year earlier. The drop in the food price index was mainly a result of falling dairy prices in the latest month, along with lower sugar, cereals and vegetable oil prices.

However, as has been the case recently, meat prices continued to rise in August, with the FAO meat price index up to 207.3 points. This was 1% higher than the previous month but 14% above last year’s level for the same month. Within the meat category, pork and sheep meat monthly averages fell back slightly, while poultry quotations were almost unchanged. However, higher overall meat prices were largely driven by a surge in Australian beef prices. Lower availability due to herd rebuilding following the recent drought, combined with increased import requirements from Asia, added support and this translated into higher beef prices on an international level.

Higher Italian imports as production lower

According to the latest figures published by Istat, Italy’s pork imports increased to 504,500 tonnes in the first half of this year, up 9% from a year earlier. This was the highest half year figure in records back to 1998. The high import requirement was a direct consequence of a sharp reduction in domestic pig meat production. The largest share of the pork imports were sourced from Germany, which provided over a third of the total. In the first half of the year, Germany supplied 9% more pork to Italy, despite lower domestic availability. In addition, the Netherlands and Spain also increased shipments by 8% and 15% respectively between January and June this year, compared with 2013. There was a similar trend across the other main suppliers, including France (up 10%), Denmark, (up 7%) and Poland (up 15%). The value of total imports during the first half of the year totalled just over €1 billion, up 7% compared with the same period in 2013.

Imports of live pigs in the first half of this year increased by 42%, to 617,600 head. Over three-quarters of the pigs imported are sourced from Denmark and the Netherlands. In addition, imports from Germany doubled in the latest period, although these increases in live pig imports failed to offset the decline in domestic production.

Exports account for a small share of Italian pork production but in the first half of this year, shipments of both pork and hams rose, by 9% and 13% respectively. Growth in pork exports largely stemmed from higher demand from Japan, increasing from 1,000 tonnes in 2013 to 4,700 tonnes in the latest bi-annual period.

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