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AHDB Pig Market Weekly

20 November 2014

AHDB Pig Market Weekly - 20 November 2014AHDB Pig Market Weekly - 20 November 2014


Has the Link Between UK and EU Pig Prices Been Broken?

This year, the gap between UK and EU pig prices has risen to unprecedented levels. This might have been expected to lead to a surge in pig meat imports but they were only up 4% in the first three quarters of the year. It might also have led to a fall in exports as they struggled to compete on price; in fact, exports are up 11% for the year to date. So is the UK market now immune to developments in the rest of the EU?

New AHDB/BPEX analysis shows that the relationship between the EU-UK pig price gap and UK pork import levels has largely broken down since 2007. However, until this year, UK prices have broadly tracked EU prices, suggesting the UK market was responding to EU prices in a way which ensured that import levels didn’t alter. That now seems to have changed too. This can probably be attributed to retailers’ response to the horse meat revelations of early 2013, which led to increased commitment to sourcing pig meat from the UK. UK pork exports also now appear to have little relationship to pig price levels relative to the EU.

The big question now is whether import and export trends will remain immune to the gap between UK and EU prices. For exports, the answer may well be yes – future trends will mainly be driven by demand, particularly from emerging markets in Asia. For imports, the answer is less certain. It will largely depend on how the big pork buyers respond. If their commitment to sourcing from the UK wavers then the price gap will have to close. However, if support for UK pork remains strong then supply and demand on the domestic market will be the key price drivers, with the EU market having only a limited effect.

To read the analysis in more detail, click here.

Producer Share of Retail Price Stable in October

October figures calculated by AHDB/BPEX show that producers received 40% of the retail pork price. This is based on the APP price which has now replaced with the DAPP. The producer share is in line with the figures from the previous two months but these were based on the DAPP, which was usually slightly lower than the APP, so in reality the producer share has declined slightly. However, as with the pig price, the average retail price also fell in October, so the underlying month-on-month change was relatively small. As such, producers’ share of the final price was 3% lower compared with October 2013. Bacon retail prices are not yet available for the whole of October. However, the gap between retail and producer prices narrowed only marginally in September, with the producer share of the average retail price remaining at 36%. This was also around 3% down on a year earlier.

The marginal month-on-month fall in retail pork prices was mainly driven by a 7% decline for loin steaks and a 1% drop for minced pork. In contrast, prices for traditional pork sausages, fillet end leg and pork fillet actually increased slightly. Retail prices for the other cuts remained almost unchanged compared with September. However, annual comparisons highlight sharp declines across most cuts. Traditional pork sausage prices were down by 9% and boneless leg price by 8% on a year earlier. Price falls were recorded for the higher value cuts as well, including loin steaks (down 7%) and fillet of pork (down 6%). The only cut to record an increase was loin chops, where the average retail price was higher by 16% compared with October 2013.

UK Pig Prices

For the week ended 15 November, the EU-spec GB SPP fell to 146.89p per kg. This was 1.18p lower than the week earlier, driven by continued pressure on demand and high supplies. Prices have also been influenced by cheaper imports from the continent. Please note that one plant is missing from the SPP sample this week. As the SPP continues to fall to a new low, prices are now 16p below the level when the series began in April. For the same week, the AHDB/BPEX estimated slaughterings increased for the fourth consecutive week, reaching 179,000 head, up by 1% from a year earlier. For the week ended 15 November, carcase weights averaged 82.64kg, down marginally from the previous week. For the week ended 8 November, the EU-spec GB APP fell by 1.84p to 151.92p per kg. In the same week the SPP stood at 148.07p/kg, a difference of almost 4p between the two price series.

The 30kg weaner price for the week ended 15 November rose to £50.64 per head. This recorded an increase for the third consecutive week and was up by £1.39 compared with the week before, suggesting that the weaner market has gained some momentum. However, breeders were worse off this year, as the weekly average stood almost £7 below last year's level although still up almost £6 compared with the same week of 2012. During the same week, the 7kg weaner price fell marginally to £35.33 per head, also down £7 from last year's level and 40p compared with the previous week.

Irish Trade Strengthens in First Nine Months of 2014

At 110,700 tonnes, latest trade figures showed a stronger position for Irish exports between January and September, as volumes increased by 12% compared with the first nine months of 2013. There were higher purchases of Irish pork from both EU and non-EU markets. There was 14% more pork exported to the EU, with the main destination being the UK, where supplies were up by 6% year on year. However, bacon supplies to the UK were down sharply, while processed exports, including sausages, increased. Pork shipments to Denmark, presumably for re-export, almost doubled but 12% less pork was exported to Germany.

Pork exports to non-EU markets rose by 10% year on year, despite the loss of the Russian market, which was Ireland’s leading third country market last year. This made China was the key buyer of Irish pork, as exports increased by 6% on a year earlier. Meanwhile, trade with Japan strengthened significantly, rising from 1,300 tonnes last year to 9,100 tonnes this year between January and September. In addition, many other smaller markets took much higher volumes this year, notably South Korea, the US and the Philippines. Between them, these four markets accounted for almost 20% of Irish exports this year, up from just 5% last year. The overall value of pork exports between January and September this year totalled €264.8 million, up 13% on the year, as unit prices were slightly higher.

French Exports Down but Imports Stable

In the first nine months of this year, French pork exports declined by 3% compared with the same period in 2013. Just over three quarters of exports were shipped to the EU and volumes came down by 1% on a year earlier. Italy accounts for a quarter of the French exports, by far the leading destination. Shipments to this market rose by 1% but declines to other, smaller markets led to an overall fall in French exports. Purchases by the UK fell marginally but it remained the second largest buyer of French pork, while exports to Greece were down by 2%. However, the decline was much sharper for Spain, with volumes down 22% compared with January to September 2013. Outside the EU, pork exports to China also came down by 22% on a year earlier. France continued to diversify into a range of smaller markets following the Russian import ban, with Bulgaria, Philippines, Hungary and Japan included among them. The value of exports totalled €639.1 million, down 6% compared with a year earlier, as lower prices added to the decline in volumes.

Pork imports into France came down marginally year on year, to 273,300 tonnes, in the first nine months of this year. With French production levels in the January to September period this year similar to 2013 and exports down, the requirement for imports was slightly lower, given subdued consumer demand. Most pork imports were sourced from Spain and Germany, collectively accounting for 84% of the total. Spain is the dominant supplier and volumes fell by 2% on a year earlier. However, imports from Germany rose by 5% and supplies from Denmark almost doubled. The value of total imports rose by 1%, to €709.1 million.

Feed Market Update

UK May-15 feed wheat futures gained strongly through last week, closing on Tuesday at £131.25/t. Paris Mar-15 maize futures climbed only €1.25 to €153.75/t over the same time. Weaker sterling against the euro over the period was a key driver of the greater gains in UK feed wheat values. A number of weather issues re-emerged in global grain markets over the past week, notably in the US and Russia/Ukraine, adding upward pressure to prices. Results from the Early Bird Survey of planting intentions for 2015 suggest a 5% reduction in the UK wheat area. Winter and spring barley, pulse and fallow areas are estimated to be higher on the year, potentially showing the impact of the 3-crop rule on planting decisions.

Hi-Pro soyameal prices (Ex-store East Coast, November delivery) were up £2 on the week last Friday at £350/t. Rapemeal prices (Ex-mill Erith, November delivery) followed these gains, up £2 to £170/t. GB soyameal prices are currently at a 5 month high, with strong soyameal demand in the US driving prices. While gaining some strength from soyameal markets, spot GB rapemeal values now equate to 49% of soyameal values, compared to 61% in mid-June. According to the Early Bird Survey, the UK oilseed rape area is seen down 4%.
To read more about the latest developments in the feed market click here.

Consumer Trends and China Feature at AHDB Outlook 2015

Bookings remain open for the 2015 AHDB Outlook Conference. It will be held at One Great George Street in London on Wednesday 11 February. Hosted by the three livestock divisions of the Agriculture & Horticulture Development Board (AHDB) – EBLEX, BPEX and DairyCo – AHDB chairman Peter Kendall will address delegates 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, with a particular focus on future consumer trends and China and other Asian markets. In the plenary session, Richard Nicholls Head of Intelligence and Economics, 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, 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, including a session covering pigs and poultry, giving an overview of the market outlook specific to each sector.
To book your place at the conference, please click here.

Welsh Pig Numbers Up

New figures from the June Survey of Agriculture and Horticulture show a strong year-on-year increase in the number of pigs in Wales. In June 2014, the Welsh herd totalled 28,400 head, up 14% on a year earlier. However, the breeding herd rose by just 1%, to 4,400 head, so the increase was mainly due to higher numbers of pigs being fed for slaughter. As well as some improvement in productivity, this suggests that more Welsh-born pigs are being finished in Wales, rather than crossing the border into England.

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