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AHDB Pig Market Weekly

19 December 2014

AHDB BPEX Pig Market Weekly 18 December 2014 AHDB BPEX Pig Market Weekly 18 December 2014


Season’s Greetings

Everyone involved with Pig Market Weekly would like to wish our readers a Happy Christmas and a prosperous New Year.
We will not be publishing Pig Market Weekly over the next two weeks, so this edition will be the last of 2014. The next edition will be published on Thursday 8 January 2015. In the meantime, we will continue to publish stories on the Market News page of the BPEX website, so keep an eye on that if you want to stay updated on market developments over the festive season.

Contrasting trends in UK pork exports and imports

Latest figures published by HMRC show a 2% year-on-year increase in October pork exports, to 17,400 tonnes. In fact, this was a 17% rise compared with the same month in 2012, following a strong performance last October. For the first time in six months, Germany held the position as the UK’s number one market for exports. Volumes exported to Germany increased by 4% compared with a year earlier. However, the amount exported to the EU declined by 5% overall. This came as higher supplies available on the continent reduced import requirements. This meant that China moved into second position as its purchases increased by 12%, which contributed to the overall increase in shipments. Despite the increment in volumes exported, the value of supplies totalled £19.9 million, marginally down on October 2013, as a result of lower export prices.
Total offal exports in October rose by almost 50%, up from 2,300 tonnes in October 2013 to 3,500 in 2014. This stemmed from a significant increase in shipments to China/Hong Kong, which nearly doubled in the latest month. The value of offal exports in October reached £3.2 million, up 78% on the year earlier.

With UK supplies outstripping demand, UK pork imports in October were 6% lower than last year, at 29,900 tonnes. This was the lowest October figure since 2009 and came despite the record difference between UK and EU pig prices during the month. With the exception of Belgium and Ireland, imports from all the key suppliers were lower. Denmark, Germany and the Netherlands account for almost two thirds of the total imports and supplies were down by 2%, 12% and 2% respectively. Given the price drops across the European Union, the value of imports came down by 19% to £55.1 million. Bacon imports fell by 2% in October, compared with a year earlier, largely resulting from a 15% decline in supplies from the Netherlands. Imports of sausages fell by 4% on October 2013, given a 10% fall in volumes from the main supplier (Germany). Processed pig meat was the only category to record an increase in imports, up 3% year on year, despite a 22% fall in supplies from Ireland.

Further improvements in physical performance

Latest figures from Agrosoft for the physical performance of the GB pig herd paint a mostly positive picture. Sow productivity continued to improve, particularly in indoor systems. The number of pigs weaned per indoor sow in the year to September 2014 averaged 25.8, up from 24.1 in the preceding 12 months. In contrast, productivity from outdoor sows was little changed on a year earlier, at 21.7 pigs per sow per year, although this was slightly higher than in the previous quarter. The increase for indoor breeders was driven by more than half an extra piglet born alive per litter, up from 12.1 in the year to September 2013 to 12.7 a year later. Litter sizes also increased outdoors, from 11.0 to 11.3 born alive.

Feed efficiency in the rearing herd also improved, with the average FCR falling from 1.75 in the year to September 2013 to 1.60 in the 12 months ending this September. The rate of weight gain during this stage was little changed on recent periods, at a fraction under 500g/day. Feed conversion in the finishing herd was also similar to a year earlier but was slightly worse than in more recent quarters, partly due to the heavier finished weights over the last year. FCR in the finishing herd (from 35kg to finish) averaged 2.74 over the year to September, compared with 2.78 in the previous 12 months. In addition, daily weight gain was slightly higher, at 828g/day. Overall, this meant that the amount of feed used to produce each pig, taking account of sow feed as well as rearer and finisher feed, was little changed on recent quarters.

UK Pig Prices

The EU-spec GB SPP for the week ended 13 December continued to fall, this week by 0.81p to 143.84p per kg. This is a fall of over 20p per kg since the peak of the SPP at the end of May. In part the price has been affected by an increased supply; AHDB/BPEX estimates that slaughtering increased to 202,000 head, up on the week as expected in the run up to the holiday period but a 5% increase on this time last year. Higher throughputs are an indication of clean pigs being put forward before processors close over the Christmas period, as well as meeting increased festive demand. Carcase weights continued their recent decrease to a weekly average of 81.21kg, reflecting typical seasonal trends.
For the week ended 6 December the EU-spec GB APP stood at 148.21p per kg, losing a penny on the week. The GB SPP for the same week was 144.65p per kg, marginally reducing the gap between the two prices to 3.56p.

The 30kg weaner price increased marginally (17p) for the week ended 13 December, to £46.85 per head as throughputs stabilised amongst suppliers, despite uncertainty over spring finished pig prices. However, this is almost £11 per head less than this time last year, indicating that the market remains weak. The average 7kg weaner price saw a stronger increase, up 81p per head on the week to £35.28, with slightly tightened throughputs. Be that as it may, the market remains uncertain as the breeder received around £7 less than a year ago.

Producer share of retail price falls in November

The latest AHDB/BPEX information shows that in November the producer share of the retail price for pork continued its downward trend and fell to 38%. This is the lowest share since March 2012 and is the result of the biggest month on month fall of farmgate prices this year; at 150p per kg they were down nearly 6p from October. In contrast, retail prices returned to levels seen in September, helped by the run up to Christmas. This has put producers’ share at five percentage points less than in November 2013. The most recent data shows that the producer share for bacon has also decreased, standing at 35% in October, influenced by increasing retail prices. This represents a three point decrease in the share received by the farmer in October 2013.

The change in retail pork prices in November were varied across the categories of pig meat sold in GB. Fillet of pork recorded the biggest decrease of 3% with traditional pork sausages and fillet end leg also experiencing small decreases in retail price. Static prices or marginal increases were seen in the other cuts with the exception to boneless leg joints, which increased in price by 2%. However, over the last year loin chops have seen a significant 18% increase in price whilst all other categories have decreased. Boneless leg fell by 10%, loin steaks and sausages by 9% and other cuts had smaller decreases, including minced pork falling 4% and diced pork 2%.

Italian imports increasingly dominated by Germany

For the first three quarters of 2014 Italy remained a large net importer of pork, with virtually all of its demand being met from within the EU. Imports were enhanced by product previously bound for Russia being redirected throughout the continent. A 9% increase led to 762,700 tonnes being imported between January and September, filling the deficit from decreased internal production. Imports predominantly came from Germany, with volumes 12% higher than last year, as demand remained strong for processed pig meat over fresh joints. Most other major suppliers also increased shipments to the Italy; the UK supplied around 800 tonnes more pork than during this period last year. The unit price for pork imports fell back on the year by 5%, with reductions across virtually all of the suppliers, as strong EU production provided ample supply. Nevertheless, increasing volumes took total import value to just over €1.5billion, up 4% on last year.

Non-EU pork exports rose in the first nine months of 2014, driven by rapidly increasing exports to Japan, despite a decrease in shipments to the main market from last year, Hong Kong. This growing Japanese trade pushed the total pork export value for this period to almost €130 million. Speciality hams have traditionally been the strongest Italian pig meat export product and the first three quarters of 2014 saw an 18% increase in this trade, despite subdued trade to the leading French and German markets. Strong growth was recorded to other EU markets and to key global buyers such as the US and Japan. This increased the value of this sector’s exports by 11% on the year to €526 million. Offal exports also increased during this period, by 10%, with an export value of €38 million as Asian markets, as well as European markets such as Spain and France, continued to grow.

Feed market update

Despite May-15 UK feed wheat futures trending downwards throughout most of the week, on Friday fears resurfaced that Russia may lower grain exports in order to help solve its problem of high domestic inflation. On Tuesday, May-15 UK feed wheat futures settled at £139.00/t, up £4.05 on the previous week. This rebound in UK wheat prices was also echoed across both the May-15 Paris and Chicago wheat futures contracts. In their updated World Agriculture Supply and Demand Estimates (WASDE) released last week, the USDA revised their forecasts for global output of wheat and maize higher compared with their earlier estimates. In October, for the first time since May 2012, HMRC reported that the volume of wheat exported by the UK was higher than the volume imported.

However, there is still a lot of work to be done, as the export pace is lagging behind that of previous large production years.
The events of last week also introduced a degree of volatility to oilseed markets. Chicago soyabean prices rose prior to the release of the WASDE, in anticipation of lower US stocks. With global production raised higher, the report subsequently initiated a decline in prices. The US National Oilseed Processors Association’s (NOPA) latest crush data showed the fourth largest crush on record in November. However, because this figure was less than that expected by trade estimates, it resulted in a decline in Chicago soyabean futures prices, falling by $8.45 since Friday’s close, to settle at $380.81/t on Tuesday. UK rapemeal (34%, Ex-mill Erith, December delivery) was £186/t on Friday (12 Dec), up £5 on the previous week. Hi-Pro soyameal (Ex-store East Coast, December delivery) was £338/t on Friday, up £1 on the week.

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

Will improving economic conditions increase food sales?

The UK economy is picking up speed; GDP growth, low inflation, and falling unemployment all point to a brighter economic future. Pay growth has slowed considerably since the financial crisis of 2008 but in the latest period earnings increased in real terms for the first time since September 2009. So, will this favourable news lead to a rise in retail sales?
Latest evidence suggests that it may be a while before it does. Many British shoppers have acquired shopping habits during the recession that will take some time to change. The ‘savvy shopper’ might be here to stay.

To read our analysis of latest evidence about consumer confidence and how it may impact on grocery sales, click here.

Spanish growth tempered by falling prices

Despite lower domestic demand for pig meat, Spain slaughtered 3% more pigs in the first nine months of this year. The June census suggests some optimism in the industry at the time, partly a result good producer margins in the first half of the year, given some of the lowest production costs and highest pig prices in the EU. However, since the summer, prices have fallen to their lowest point in four years; at €134 per 100kg in early December the Spanish price was below the EU average. Nevertheless, Spain’s success at diversifying its export markets, coupled with the low production costs, could mean its industry is better placed to weather the current storm in the EU pig market than some of its competitors.
To read our analysis of the Spanish pig market in more detail, click here.

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