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AHDB Pig Market Weekly

13 November 2014

AHDB Pig Market Weekly - 13 November 2014AHDB Pig Market Weekly - 13 November 2014


EU Pig Kill Marginally Down in August

August figures published by Eurostat showed a marginal decline in EU pig slaughterings compared with the same month in 2013, to 19.3 million head. However, it is worth noting that there was one less working day in August this year, which reduced the overall throughputs. As a result, on a per working day basis, pig slaughterings in the EU were actually 4% higher compared with a year earlier.

This increase in supply contributed to the fall in pig prices which has been apparent since the summer. Pig meat production in the EU for August was also almost unchanged from a year earlier at 1.70 million tonnes. Based on these figures, pigs were slightly heavier in the eight month of this year than in August 2013.

During August, Denmark recorded the largest year-on-year decline in pig slaughterings, by 16%, although this may be subject to revision as Danish figures have been unusually volatile of late. Declining throughputs are partly a result of a continued rise in weaner exports, leaving lower availability for the Danish slaughterhouses.

In France, pig slaughterings declined by 4% on the year. However, higher throughputs in the other key markets offset these declines, leading to an overall stability. For example, German and Spanish pig slaughtering both increased by 1% on a year earlier. Irish abattoirs slaughtered 4% more pigs in August this year. Increases were even more evident in Poland and the Netherlands, where throughputs rose by 7% and 8% respectively.

UK Imports and Exports Strengthen in September

During September, pork imports into the UK increased by 3% on the year to 30,200 tonnes. This was the largest monthly increase since April, resulting from somewhat higher supplies on the continent. With these supplies, combined with a strengthening pound, adding further pressure on prices, this made EU pork more attractive on the domestic market.

However, despite the gap between EU and UK pig prices reaching unprecedented levels, the increase in imports remains modest. Imports of German pork declined by 29% compared with the same month last year but this was offset by increases from most other suppliers. The value of pork imports in September totalled £58.8 million, down 12% on a year earlier, as a result of subdued import prices.

Bacon imports for September also rose, with more coming in from Denmark and Germany, in particular. However processed and sausage imports were down by 3% and 4% respectively compared with September 2013.

At 17,900 tonnes, UK pork exports also increased by 3% in September, compared with a year earlier. Two thirds of the pork is exported to the EU but this is lower than the previous year when nearly three-quarters was shipped to the continent. In fact, exports to the EU declined by 7% year on year as prices were 7% higher in euro terms. Increased demand from Asian markets led UK exports, particularly from China, as exports to this market rose by a quarter in the latest month. Supplies to Hong Kong increased by more than a third on the year.

The value of UK pork exports was marginally higher than last September, at £21.2 million, despite a slightly lower average price. Stronger growth was recorded for offal exports, up by 13% on September 2013. The EU accounted for a smaller share of UK offal exports and volumes sent to the continent fell by 23%. However, trade with China and Hong Kong grew, by 31% and 50% respectively, to account for two-thirds of total volumes.

UK Pig Price

For the week ended 8 November, the EU spec GB SPP fell by 1.69p to 148.07p per kg. Please note that one plant is missing from the SPP sample this week. While prices across Europe have somewhat stabilised, the UK finished pig price has continued to fall, for the fifth consecutive week.

As such, subdued domestic demand has continued to add pressure on prices. AHDB/BPEX estimated pig slaughtering for the week ended 8 November totalled 175,800 head, down by 3% on the year earlier. Carcase weights for the same week averaged 82.70kg, marginally higher than the previous week. For the week ended 1 November, the EU-spec GB APP fell by 1.07p to 153.76p per kg. In the same week the SPP stood at 149.76p/kg, a difference of 4p between the two price series.

The 30kg weaner price rose by 34p for the week ended 8 November, to £49.25 per head while numbers were considerably higher. This was somewhat surprising given that finished pig prices have fallen further. However, the weaner price increase may be an indicator that finishers are anticipating that pig prices will rise in the spring, as is usually the case. Nevertheless, breeders received £6 less compared with the same week in 2013.

In contrast, the 7kg weaner market edged down from the previous week, by 58p to £35.73 per head, while numbers were well down. The annual comparison showed a price fall of almost £8 per head.

Contrasting Trends in US and Canadian Exports

At 1.1 million tonnes, US pork exports rose by 4% in the first nine months of this year, compared with the same period in 2013. This was somewhat surprising given the lower supplies in the US market, resulting from the PEDv outbreak. However, many major export markets were also affected by PEDv, increasing demand for US pork.

The overall rise is a result of higher exports in the first half of this year, which mitigated the impact of a 9% decline in the third quarter, when US supplies were at their tightest. Mexico is the largest market for US pork and exports to the country rose by 18% on the year. Asian markets are also key for US pork exporters, with Japan, China and South Korea collectively taking 41% of total pork shipments. Japan maintained its position as the second largest buyer of US pork but volumes fell by 4% year on year.

Similarly, exports to China fell by 18% but trade with South Korea strengthened by 35%. The tight supply situation meant prices were significantly higher, so the total value of US pork exports in the period January to September amounted to $3.7 billion, up 15% on a year earlier.

Canadian exports weakened by 3% year on year in the first nine months of this year, to 646,400 tonnes. The leading markets for Canadian exports recorded increases, including higher shipments to the US (up 4%), Japan (up 4%) and Russia (up 58%). These three markets collectively accounted for 65% of total Canadian exports.

The rise in supplies to Russia was a result of its ban on EU pork, which provided extra opportunities for Canadian exporters. However, the third quarter figures show lower exports to Russia as the import ban was extended to Canada in August. Declines across several Asian markets, mainly due to increased competition from EU pork, contributed to the overall downturn in exports. In particular, shipments to China came down by 21%, while exports to South Korea, the Philippines and Taiwan also declined.

As for the US, export prices were significantly higher, so the total value of Canadian exports reached C$2.3 billion, 22% up on January to September 2013.

Higher Pig Numbers in Denmark

According to the latest census figures released by Statistics Denmark for 1 October, total pig numbers had increased by 4% compared with the same date in 2013, to 12.8 million head. This was the largest pig herd recorded since the second quarter of 2011 and was a result of more pigs being kept for slaughter.

In particular, there were 7% more young pigs (under 50kg) while slaughter pigs (over 50kg) increased by 4% year on year. This is partly attributed to pigs being kept to heavier weights this year but it also suggests some slowdown in exports of weaners to other countries, where Germany and Poland are the key markets, given the significant fall in prices in recent months.

Falling slaughter pig numbers have been an issue in the Danish pig industry for several years, so this year’s rise will be welcomed by processors who have struggled with declining throughputs.

The total Danish breeding herd was unchanged from a year previously. In-pig sow numbers rose marginally but in-pig gilt numbers declined, so the total number of pregnant animals was unchanged.

This meant that sow numbers were slightly lower than on 1 July, unlike last year, which could be the first sign that recent price falls are hitting producer confidence. However, the number of maiden gilts rose by 7% year on year, which suggests that some producers still have positive intentions. Piglet numbers increased by 2% compared with October 2013, indicating a further rise in productivity.

Animal Feed Production Lower in Third Quarter

Latest figures from Defra show that GB production of animal feed in July to September was 5% lower than a year earlier. This was largely driven by a sharp fall in production of ruminant feed, following a good grazing season and with forage supplies high, although poultry feed output was also lower.

This might suggest a reduction in poultry meat production ahead, with broiler chick placings also 2% lower during the quarter. In contrast, pig feed production was 1% higher than a year before, mainly due to a 6% rise for finishing feed.

This adds further evidence that the productivity of the UK herd has improved, meaning more pigs on the ground. It also reflects the heavier weights of finished pigs of late. Output of breeding pig feed was 1% up on the third quarter of last year but less grower and creep feed was produced.

With supplies still tight following last year’s reduced harvest, 12% less wheat was used in compound animal feed production in July to September this year. As in recent periods, this was partly offset by increased use of other cereals such as barley, oats and maize. Wheat use can be expected to rise going forward, due to the much larger harvest this year.

There was a similar pattern for cereals by-products, with less wheat feed used and more distillery by-products. For the protein component of feed, there was increased use of sunflower cake/meal and of field beans but use of most other ingredients was lower.

Feed Market Update

UK feed wheat futures (May-15) closed at £126/t on Tuesday, unchanged from a week earlier, although prices fell to £124 as at Friday’s close. Tuesday's settlement price for Chicago wheat futures (May-15) was $197.80/t, $3.60 lower on the week, while Chicago maize prices (May-15) closed $3.70 higher compared to last Tuesday at $155.70/t. The latest USDA supply and demand estimates, published on Monday, saw forecast global wheat production in 2014/15 revised lower to 719.9Mt.

However, the outlook for EU wheat output was increased to 155.4Mt (9% higher year-on-year). Estimates for global wheat demand were reduced to 712.7Mt. There was little change in forecast global maize production. Although the estimate for US maize production was reduced on the basis of lower expected yields, a record crop is still expected. EU maize production was revised just over 2Mt higher to 73.1Mt (14% higher than in 2013/14).

Chicago soyabean futures (May-15) closed at $393.50/t on Tuesday, up $18.90. The upward price movement was also reflected in Paris rapeseed futures (May-15); the settlement price on Tuesday was €344.50/t, compared with €340 a week earlier. Hi-Pro soyameal prices (ex-store East coast, November delivery) were £348/t on Friday, down £1 from the previous week. Over the same time period, rapemeal prices (ex-mill Erith, November delivery) declined by £2 to £168/t.

Global soyabean output was pegged 0.9Mt higher, at 312.1Mt, by the USDA report. This was mainly due to higher projected yields for the US crop. Production forecasts for Brazil and Argentina, who are in the process of planting their soyabean crops, were left unchanged from October’s estimates.

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

Only Slow Improvement in EU Economy

Economic growth in both the EU as a whole and the euro area is likely to remain weak for the next two years, according to the EU Commission’s autumn economic forecast. Forecasts have been revised down from the last report, following lower-than-expected economic growth on the back of weak domestic demand and persistent unemployment. This is expected to continue to affect consumer confidence and demand, with shoppers still favouring cheaper meats and cuts.

The only slow economic improvement in the EU contrasts with the strong rebound in the US economy including in domestic demand.

For the largest economy in the EU, economic growth in Germany in 2015 and 2016 is expected to improve following a weak performance this year, with the support of growing domestic consumption and improved export performance. The labour market is predicted to benefit from supportive government policies, which will help lower unemployment and drive wage growth.

These are expected to support consumption trends and an increase in household spending.

France’s economy has been weak since mid-2011, with only moderate growth expected over the next two years. Domestic demand has been constrained. Job creation has been low although expected to improve but consumer confidence is likely to remain low, which will affect shopping preferences.

Italy has experienced another year of recession although both the economy and domestic demand are expected to record modest growth next year. However, unemployment is expected to remain at high levels and household spending under pressure.

Economic recovery in Spain is projected to gain momentum over the next two years, with improving consumer confidence and better labour market prospects. Domestic demand growth is the main driver behind this.

Growth in the UK economy is predicted to continue to be among the highest in the EU, driven by domestic demand. The labour market is expected to further improve and unemployment to fall. Household consumption growth is, however, expected to slow slightly as wage growth remains low and households appear likely to build on savings.

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