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AHDB Pig Market Weekly

03 November 2014

AHDB Pig Market Weekly - 30 OctoberAHDB Pig Market Weekly - 30 October


UK Pig Meat Supply Growth Set to be Slower

Based on the bigger than expected fall in the UK breeding herd recorded in the June survey, UK pig meat production in the coming months may grow more slowly than previously forecast. Nevertheless, with productivity continuing to improve, latest AHDB/BPEX forecasts suggest that supplies will again be higher over the coming year. Over the last five years, productivity has improved at a steady rate and this should be sustainable in the absence of major disruptions, such as disease outbreaks. Therefore, for most of the coming year, pig slaughterings should grow at a similar rate to that recorded since the spring. This means that they will be up around 2% on a year earlier, although growth may stall for a while early next year (assuming the June survey figures are accurate). Pig meat production is expected to rise slightly faster than slaughterings, due to a further small rise in carcase weights.

EU prices have been well below UK ones all year and they are expected to remain low. Nevertheless, so far this year, import growth has been modest, about 5%, as retailers’ commitment to British pork remains strong. Assuming this continues to be the case, there may only be limited further growth next year. Despite the strong pound and relatively high prices, exports have increased again this year and prospects remain good for the coming year. Balancing all these factors out, supplies available for consumption on the domestic market have been higher this year than last. So far, this hasn’t been matched by an increase in consumer demand, creating the pressure on pig prices which has been apparent for much of the year. Supply growth is forecast to be slower in 2015 but, even so, higher consumer demand will be needed to match the increased availability.
To read more detail about the AHDB/BPEX forecasts for pig meat supplies, click here. Further analysis of the outlook for UK supplies can be found in the new edition of Pig Market Trends (see below).

EU Pig Prices Continue to Fall

During the 4-week period ending 19 October, the average EU pig price fell by €15, to €142.79 per 100kg. EU pig prices usually drop at this time of the year but the fall has been particularly sharp this year. The average finished pig price was €37 below the same week in 2013 and prices have remained well below last year’s level since July. Subdued domestic consumption and the loss of exports to Russia, which normally peak during the autumn, are still putting pressure on EU pig prices. Reports also suggest a modest increase in supplies since the summer, while demand from other export markets may also be beginning to ease as the effect of PEDv diminishes. For the latest week, ending 19 October, the EU pig price was €46 below the UK pig price (equivalent to 37p/kg). This was close to the record gap recorded in the previous week and significantly higher than the €20 difference in the same week of 2013.

Almost all EU countries recorded falling prices in the latest 4-week period. Amongst the key markets, the largest decline was recorded in Spain (down €24), bringing prices there more into line with those in Germany, followed by the Netherlands and Belgium where prices came down by €19. Producers in Denmark received €18 less for their pigs compared with four weeks earlier, French prices were reduced by €17 and German quotes came down by €16. Irish and Polish producers also suffered but the decline in finished pig prices was much smaller. For the 4-week period ending 19 October, prices in Poland and Ireland declined by €9 and €4 respectively.

UK Pig Prices

For the week ended 25 October, the EU-spec GB SPP fell to 151.09p per kg. This was around 1p below the previous week’s level. Please note that one plant is missing from the SPP sample this week. Higher supply availabilities continue to add pressure to finished pig prices, as demand evidently remains subdued. For the latest week, the AHDB/BPEX estimated slaughterings stood at 162,500 head, around 1% lower compared with the same week in 2013. However, the average carcase weight for the week recorded another record high at 82.89kg, indicating that some pigs are still being rolled and that supply is actually higher than slaughter numbers suggest. For the week ended 18 October, the EU-spec GB APP fell by 1.44 to 156.11p per kg. During the same week, the SPP stood at 152.35p/kg, a difference of nearly 4p between the two price series.

At £47.49, the 30kg weaner price for the week ended 25 October fell to its lowest point since March last year. This was a week-on-week drop of almost £3 and meant an annual difference of £7, with prices lower this year. Weaner prices would normally start to increase around this time of the year but the subdued finished pig market has affected confidence in the weaner market. In addition, the extra pigs in the system mean that accommodation remains in short supply. Similarly, during the same week, the 7kg weaner price stood at £36.45 per head, over £1 down on a week earlier. The 7kg weaner market is also weaker than a year ago, with an annual price differential of £6.

Reduction in Chinese Imports in Year to Date

Figures published by China Customs show a 2% decline in pork imports in the first nine months of this year. Given the financial difficulties faced by Chinese producers in 2012-13 and the resulting fall in domestic production, pork imports were particularly high last year. As such, despite the latest decline, Chinese pork imports remain historically high. The EU maintained its position as the dominant supplier of pork to China, accounting for 63% of the total, in spite of a 2% decline in volumes imported. China purchased 21% less pork from Germany but supplies from Spain and Denmark increased by 35% and 6% respectively. While the UK plays a smaller role in the Chinese import market, around 5% of the total, strong growth was recorded, with a 38% rise in UK pork shipments.

The US is the other key supplier of pork to China, taking 23% of the market. Across the first nine months of this year, imports from the US increased by 15% compared with the same period in 2013. However, by the third quarter, its shipments were down by nearly half, further strengthening the EU’s market share. The value of Chinese pork imports in the first nine months of this year totalled RMB 4.8 billion, down 4% from a year earlier.

China’s pig offal imports were almost unchanged in the first nine month of this year, at 607,500 tonnes. Over half of the total offal imports were sourced from the EU but, like the pork market, the US remained the key country supplier. Higher offal imports from the US were offset by declines from the main EU suppliers and Canada. The value of offal imports totalled RMB 6.5 billion, down 6% compared with January to September 2013.

Sharp Decline in US Slaughter Offset by Higher Weights

US pig slaughterings in the first nine months of this year were 5% lower than the same period in 2013. PEDv has reduced the number of pigs weaned per litter and, consequently, there have been fewer market pigs available for meat production. The shortfall reached as much as 14% in August but fell to just 2% in September. The average finished pig carcase weight during the nine months was, at 97kg, around 4% higher than the same period in 2013, largely offsetting the sharp decline in throughputs. High pig prices and low feed costs have meant that it has made economic sense for producers to add as much weight as possible to their animals. As a result, pork production in January-September was only 1% lower than the same period in 2013. Industry reports suggest higher slaughterings from September onwards and the latest census results indicate positivity, with farmers increasing their female breeding stock and intending to farrow more litters. As such, an improvement in slaughter numbers is likely in the short-term.

The supply shortages were evident in the US barrows and gilts price, where the nine month average to September, of $79 per 100lb liveweight (equivalent to about 140p/kg deadweight), was nearly $15 above the previous year’s level. In July, US pig prices reached a new record level of $95 per 100lb but have since fallen back as it became clearer that the shortfall in production would be smaller than originally feared. The latest monthly average in September stood at $74.36 per 100lb lw, still over $6 above last year’s level for the same month. However, market reports suggest that prices have continued to fall during October and are now close to year earlier levels. This follows sharp declines in pork cutout (wholesale) prices as supplies begin to increase.

Feed Market Update

Nov-14 UK feed wheat futures continued on an upward trend for the most part of last week, before closing down at £119.80/t on Friday. This week, prices have climbed again, closing at £121.40/t on Tuesday. In the global grain markets, there was a similar loss of momentum to the price rally at the end of last week for Chicago maize and wheat. However, both futures prices are up again this week. The latest EU MARS Bulletin forecast the average EU maize yield at 7.59t/ha, up 12.5% on 2013/14, and 11.8% higher than the previous 5-year average. Russia’s wheat harvest may fall between 15% and 20% in 2015, according to local analysts SovEcon. Establishment of autumn planting appears to have been weak and the depreciating rouble is increasing input costs, making the option to re-seed areas lost over winter increasingly expensive.

Domestic oilseed prices reached two-month highs on Friday, with Rapemeal (34%, ex-mill, Erith, October delivery) reported at £165/t, up £5 on the previous week. The Hi-Pro soyameal price (ex-store, East Coast, October delivery) was reported at £337/t on Friday, up £19 on the previous week and the first week-on-week increase in four weeks. Oilseed values have taken support from strengthening in global markets, with dry conditions slowing soyabean planting in Brazil. However, the reality of big global production this season could subdue prices, as the return of drier weather in the US should be supportive of soyabean harvest progress.

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

Burgers Drive Growth in Eating Out

In the second quarter of this year, eating out at restaurants and other food outlets grew for the third quarter running Visits to restaurants have increased 1% while spending has gone up 2% compared with last year, according to data from NPD Crest. This is equivalent to an additional 130 million visits and £1 billion spend. An increase in consumer confidence and a pleasant and long summer have contributed to this growth.

But does this really mean the end of cautious consumer spending?
To read more about latest developments in the foodservice market, click here.

Booking now open for Outlook Conference

The 2015 Outlook Conference will be held at One Great George Street, in London, on Wednesday 11 February. Hosted by the three livestock divisions of the AHDB – BPEX, EBLEX and DairyCo – AHDB chairman Peter Kendall will address representatives from the meat and dairy supply chains when he opens the conference. The programme will explore factors that affect delegates’ businesses in their respective sectors, including trade developments and emerging opportunities.

In the plenary session, Richard Nicholls, Head of Intelligence and Economics at the Future Foundation, will look at changes to consumer preferences which are set to influence the market for livestock products over the next 2-5 years. Nick Miles, Asia-Pacific Region Manager at the Institute of Grocery Development, will focus on how the Chinese market and other key markets in Asia are changing and how this is affecting demand for dairy and meat products. Separate breakout sessions will follow, giving an overview of the market outlook specific to each sector, including one covering pigs and poultry.

Bookings for the conference are now open, so to reserve your place please click here.

Pork imports up in South Korea and Hong Kong

South Korea’s pork import market performed strongly in the first nine month of this year, as supplies to the country were up 16% on a year earlier. This was largely due to lower domestic production, partly because of a PEDv outbreak in the country. However, imports were below 2012 levels, when the recovery was still underway following earlier FMD-related disruptions in the South Korean pig industry. Almost half of the pork imports to South Korea were sourced from the EU and shipments from across the continent rose by 50% on the year before. Within the EU, supplies from Germany and Spain rose by 91% and 72% respectively and accounted for just over a quarter of the total imports. The US, which is the leading country supplier, maintained its position and volumes shipped to South Korea increased by 2% on a year earlier but shipments from Canada and Chile were lower. The value of total South Korean imports rose by a fifth, to ?859.4 billion.

At, 176,000 tonnes, Hong Kong imports also rose in January to September, by 2% compared with the same period in 2013. However, this was 4% below 2012 levels. The EU and Brazil each accounted for 30% of Hong Kong’s total imports. Although, by country Brazil remained the key supplier, shipments from this source were 16% lower compared with the January to September period in 2013. The importance of Brazil in the Hong Kong import market also declined by 7 percentage points on the year. However, this decline was mitigated by increases from other key suppliers. Shipments from China and the EU rose by 16% and 10% respectively, the latter largely due to a sharp rise in German volumes. Despite tight supplies, volumes from the US rose by a fifth compared with the first nine months of last year. The value of total pork imports to Hong Kong amounted to HK$3.9 billion, 1% higher than a year earlier.

October Pig Market Trends out now

The October edition of Pig Market Trends (PMT) was published on Tuesday. As well as the usual summary of developments in the UK and EU pig markets and the global feed market over the last month, this month’s issue includes more detailed articles on:

  • UK outlook. Based on the bigger than expected fall in the UK breeding herd in the June survey, pig meat production may grow more slowly than previously expected. Nevertheless, with productivity continuing to improve, latest AHDB/BPEX forecasts suggest that supplies will again be higher over the coming year, with imports and exports also expected to rise. This article looks at the forecasts and what they might mean for the UK pig market.
  • Long-term retail trends. Over the last few years there has been much focus on the rise of the ‘hard discounters’. Looking at this and other retail trends over the past 40 years shows there is on-going structural change in retailing driven by changing shopper needs. In this article we take a look back and demonstrate that the grocery market is continually evolving.
  • EU forecasts. This time last year, EU pig producers were expecting 2014 to be a positive year. Then came the Russian ban on EU pork imports and by mid-October most EU producers were back in the red. Latest EU forecasts suggest supplies will remain relatively tight but this may not be sufficient to provide much support to prices. Read more about prospects for the EU pig market in the coming months in this article.
  • Foodservice trends. In April-June 2014, eating out at restaurants and other food outlets grew for the third quarter running. An increase in consumer confidence and a pleasant and long summer have contributed to this but does it really mean the end of cautious consumer spending? This article looks at latest developments in the foodservice market.

Pig Market Trends is available free of charge. Subscriptions are available by e-mailing [email protected] Recent editions can be downloaded from the BPEX website by clicking here.

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