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AHDB Pig Market Weekly

06 November 2014

AHDB Pig Market Weekly 6 November 2014AHDB Pig Market Weekly 6 November 2014


Barbecue Use Cools in 2014

The latest data from Kantar Worldpanel show that there were 65 million barbecue meal occasions in the 12 weeks ending in August 2014. The same period in 2013, which was the driest and warmest barbecue season since 2006, saw 85 million occasions, which was a big increase on the 45 million in 2012. A combination of good weather and big sporting events usually leads to an increase in barbecue use. Early summer sunshine combined with the football World Cup led to anticipation of a ‘Barbecue Summer’ in 2014. May and June performed well but England’s early exit from the World Cup, followed by chilly August weather meant that the peak was much lower than in 2013. When it comes to outdoor cooking, British consumers are reluctant unless the weather is set fair.

Due to there being fewer barbecues this year, actual sales of the majority of barbecue meats declined. Sausages and burgers are the most popular; both increased their share compared to summer 2013 and each featured in around 36 million barbecue occasions. According to the figures, since the turn of the year, lamb has seen healthy growth in the barbecue market, featuring over 7 million times, compared to 5 million in 2013. The shares held by pork and chicken declined year on year. New product development in the form of dry sauces and marinades, combined with innovative package design incorporating integrated brushes and infusers, can widen the category. At the moment, though, burgers and sausages are the hot items on the barbecue, with the whole category heavily dependent on the weather.

EU Sow Market Weakening

For the first half of the year, EU sow prices were generally above or close to last year’s level but since mid-July, prices have consistently remained below 2013 levels. The M1 German sow price stood at €1.19 per kg in the latest week, ended 26 October, 23 cents below this year’s peak and 30 cents lower than the same week in 2013. In fact, two weeks before, the M1 sow price had fallen to its lowest point since March 2011 at €1.16 per kg. Prices had fallen sharply during September, following similar trends in the finished pig market. Given the close export links with the UK, this indicates that the GB cull sow prices will also have fallen in recent months, in line with the German sow price. In addition to this, a strengthening pound is likely to have reduced prices still further, to ensure UK sow meat remains competitive on the German market.

Sow prices followed a similar trend in other key northern EU markets with the Danish and Dutch prices also recording declines. The sow markets in both the Netherlands and Denmark were at their weakest since early 2011. For the week ended 26 October, the Danish sow price stood at €0.79 per kg, a 42 cents change down on a year earlier, although prices have stabilised at this level since the start of October. Similarly, prices in the Netherlands have also stabilised since the start of the October, before rising slightly in the latest week to €0.97 per kg. French prices have fallen even more sharply than elsewhere. In July, they were only a few cents below the German price but by late October, the gap was as much as 27 cents per kg. At that point, the price had fallen to €0.92 per kg, 30 cents lower than in October 2013.

UK Pig Prices

For the week ended 1 November, the EU-spec GB SPP fell to its lowest point since the series began in April, at 149.76p per kg. Please note that one plant is again missing from the SPP sample this week. In fact, this was the first time any deadweight price was below 150p per kg since the DAPP in mid-June 2012. As the SPP continued to fall, it showed a difference of 13p since the series began and was 22p below the DAPP in the equivalent week last year, when it was just below its record high point. EU prices have showed some stability of late, so the continuing price falls indicate that domestic demand in the UK remains subdued. AHDB/BPEX weekly estimates show slaughterings in the latest week were close to last year’s level at 171,300 head but with reports of pigs still being rolled, the supply of pigs may be higher than this. Carcase weights dipped slightly for the week ended 1 November, falling by 250g to 82.64kg. In addition, the average probe measurement also declined to 11.4mm, down by 0.2mm from the week earlier. For the week ended 25 October, the EU-spec GB APP fell by 1.25 to 154.83p per kg. During the same week, the SPP stood at 151.09p/kg, a difference of nearly 4p between the two price series.

At £48.91 per head, the average weekly price of a 30kg weaner rose by £1.42 compared with a week earlier. An increase in weaner prices is typical for this time of the year but the underlying trend still seems to be downward. The latest support to the weaner price could be partly related to a reported reduction in throughputs. However, prices remain around £7 lower than the same week last year. For the same week, the price of 7kg weaner averaged £36.31 per head, 14p down on a week earlier and £6 down year on year.

Pig Farm Incomes Up In 2013/14

According to new figures published by Defra, average Farm Business Income (FBI – essentially the same as net profit) across all farm types in England was £43,100 in 2013/14. Incomes on grazing livestock farms were particularly low at around £15,000 per farm. FBI on specialist pig farms rose sharply in 2013/14, to an average of £65,200. This was the highest average income recorded since 2009/10, which was also the last time that pig farm incomes were higher than the average for all types of farm. Despite the much improved overall position, around one in seven specialist pig farms still had negative FBI in 2013/14. However, this is only half as many as in 2012/13 and was lower than for most other types of farm.

The improvement in profitability of pig farms was largely down to increased output, due to higher pig prices and improved herd productivity. Input costs were little changed overall, with higher fixed costs (e.g. labour and rent) offset by lower variable costs. Nearly 80% of FBI in specialist pig farms came from agricultural operations, compared with just 15% across all types of farm. This reflects the relatively low income from agri-environment and other support payments – just £9,000 on average across specialist pig farms, compared with £28,000 for all farm types. Grazing livestock and mixed farms would, on average, have made a loss without support payments (and over 20% still did, even with them). Income from diversification was also relatively low on specialist pig farms at £4,700, just over half of the average across all farms.

Demand in the Euro Area to Remain Constrained

The latest IMF forecasts suggest lower-than-expected growth for the global economy, with estimates for both 2014 and 2015 revised down. These poorer prospects are expected to affect consumer confidence and demand, with shoppers favouring cheaper meats and cuts. The weaker-than-expected figures are, in part, due to fears that recovery in the Euro area could stall, further weakening demand, while geopolitical risks in the Ukraine and Middle East have also become more relevant. Although tensions in these regions have not resulted in higher oil prices, there has been a negative impact on investor confidence and concerns of falling demand.

Growth in the Eurozone has been revised down, showing marginal growth for 2014, before rising to 1.3% for 2015. Within the Eurozone, even Germany, which has supported growth in the region over the last year, has shown signs of weakness. Growth rates in France have also been cut following poor economic performance in the first half of the year. Italy continues to be one of the worst performing European economies; the latest estimates suggest that the country has failed to yet emerge from recession but small growth is expected for 2015. Forecasts for Spain remain relatively unchanged but growth remains low and unemployment high, putting pressure on consumer spending.
For the UK, the 2014 GDP growth rate is higher than most European countries at 3.3%. However, wage increases are still below inflation, which continues to put consumers under financial pressure. In the short term, it seems likely that, in common with those in the rest of Europe, price conscious domestic consumers will continue to drive towards cheaper shopping baskets.

Feed Market Update

UK feed wheat futures fell over the week after rallying through most of October. The May-15 contract dropped to £126.00/t on Tuesday, having fallen since last Wednesday, the longest continuous drop since late-September. Paris and Chicago maize contracts also began to fall during this week’s trading. Despite holding steady in euro terms between Wednesday and Friday, the strengthening of the pound meant that the Paris maize contract lost £1 over that period, adding pressure to UK feed wheat prices. The delayed US maize harvest finally gathered momentum and the French maize harvest is well ahead of its level at this point last year. The past week saw further upward revisions in cereal production numbers by the IGC and EU Commission, reminding the market that the outlook is still fundamentally bearish despite the recent rally in prices.

US soyameal prices appear to have lost some support at the beginning of this week. As at Tuesday’s close, May-15 Chicago soyabean futures were over $14 lower than on Friday, while May-15 Paris rapeseed futures settled at €340/t, €8.75 lower than Friday’s close. Domestic oilseed prices, as at Friday 31 October, reached levels not seen since the end of June this year, with rapemeal (34%, ex-mill, Erith October delivery) reported at £170/t, up £5 on the previous week. The Hi-Pro soyameal price (ex-store, East Coast, October delivery) was £349/t on Friday, up £12 on the week.
To read more about the latest developments in the feed market click here.

PEDv Raises Japanese Import Requirement

Latest figures show a 13% increase in Japanese pork imports, to 619,200 tonnes, in January to September this year, compared with the same period in 2013. This was the highest nine month figure for pork imports since 2005. Since the PEDV outbreak began in October 2013, Japan had reportedly lost around 360,000 pigs up to the end of August this year, resulting in tight supplies and higher pork prices. As a direct consequence, the Japanese import requirement for pork has increased, which is reflected in the latest trade figures. The value of total imports between January and September totalled ¥339.4 billion, 17% up on last year, resulting from rises in both volumes and the average import price.

With additional supplies available, the EU became the main provider of pork to Japan, increasing its market share to 38%, up from 31% a year earlier. In the first nine months of this year, the EU supplied 234,400 tonnes of pork, 38% more than the same period in 2013. Amongst the key EU suppliers, Danish shipments rose by just over a fifth and Spanish volumes doubled. The increasing importance of EU supplies has partly resulted from the shortages on the US market. However, the United States remained the leading country supplier, accounting for 34% of the total. In the first nine months of this year, imports from the US remained almost unchanged from the previous year. Shipments from Canada and Mexico increased by 3% and 11% respectively in the latest figures.

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