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AHDB Pig Market Weekly

08 January 2015

AHDB BPEX Pig Market Weekly 8 January 2015AHDB BPEX Pig Market Weekly 8 January 2015


US Pig Herd Recovery Continues

Latest figures from the US Department of Agriculture confirm that the recovery of the US pig industry from PEDv is well underway. The new hogs and pigs inventory shows a 2% rise in pig numbers in the year to 1 December 2014. This represents a 7% increase compared with the figures for March and June 2014, when the impact of PEDv was at its height. Among pigs being raised for slaughter, only the heaviest weight category still showed a small fall in numbers, suggesting that the decline in slaughterings recorded since March will soon be over. With heavier carcases supporting pig meat production, US pig prices have now returned to the levels of a year ago, before the reduced supplies began to impact on the market.

The US breeding herd increased even more rapidly, with a 4% rise year on year, taking it to its highest level in nearly 6 years. This is reflected in farrowing intentions for the next six months, with the number of litters also expected to be up 4%. This follows a 3% increase in farrowings during September-November. An increase in the number of pigs weaned per litter, to 10.23, meant the pig crop during the three months was up 4% on the year. Productivity remains below the long-term trend, however, as PEDv continues to have some impact. The number of new cases of the disease has begun to rise again since November but is below the level recorded a year ago. Nevertheless, the new figures support earlier forecasts of a significant rise in US pig meat production in 2015, which would mean more competition for the EU on export markets.

EU Trade with East Asia Strengthens

October figures published by Eurostat show a 12% year-on-year increase in EU pork exports, to 170,300 tonnes. This was the highest monthly figure in records back to 2002, highlighting the scale of excess supplies available on the European pig market. While the year to date figures show Japan as the main destination, in October China held the position in line with the previous month. Shipments to China increased by 10% compared with October 2013. Trade with South Korea also strengthened, making it the second most important market for the EU, as volumes trebled from 8,500 tonnes in October 2013 to 25,600 in the latest month. As Japan begins to pull in more imports from the US, the EU’s share is falling, with volumes down 11% on last October. Hong Kong and the Philippines are also included in the top five destinations for EU exports in the month, highlighting the significance of Asia to the continent’s exporters since the Russian ban on EU imports. As such, the five Asian markets account for 62% of total export sales, up from 50% in October 2013. The value of EU exports in October totalled €399.9 million, up 9% year on year.

Similarly, at 113,400 tonnes, EU offal exports also recorded an increase, up 24% compared with October 2013. Even in the offal market, the Asian countries performed strongly, with China and Hong Kong taking over two thirds of the shipments. Volumes to China rose by 39%, while the increase to Hong Kong was smaller at 5%. The figures also indicate a strengthening of the Philippines and South Korean market. The value of offal exports in October totalled €140.6 million, up 26% on the previous year.

UK Pig Prices

At the start of 2015, the EU-spec GB SPP averaged 142.44p per kg for the week ending 3 January, down 1.49p on the week. This is over 20p less than when recording for the new series began in April 2014 and suggests that last week’s reported marginal increase was a seasonal anomaly. Reports indicate that some contracts have changed in the New Year, which may have contributed to the downward movement. Carcase weights have edged up in the last fortnight, with some pigs having been fed for an extra week over the holiday, also increasing the average probe measurement to 11.5mm. With business returning to ‘normal’, estimates from AHDB/BPEX suggest that throughputs have held up well during the holiday disruptions, being 19% up on the year in the latest week. As production resumes for the New Year and such ample supply is secured, prices have returned to their downward trend, as is also being seen on the continent. The EU-spec GB APP for the week ended 27 December was 146.97p per kg, half a penny down on the previous week. This decrease narrowed the gap with the GB SPP, which increased during the same week, by a penny to a 3p difference.

For the week ended 3 January, 30kg weaners averaged £44.38 a head, a drop of £3.84 on the week. This is the lowest price recorded since November 2012 and may in part be a residual result of the festive period, with an increase in availability following the holidays. 7kg weaners showed less price volatility, being on average £34.66 a head, 31p up on the week. Despite suggesting some stabilisation of prices after the downward trend of recent months, this is £8 less for the breeder than this time last year.

UK Pig Slaughterings Jump in November

Latest November UK clean pig slaughtering figures indicate that there were plentiful supplies on the UK market. The number of clean pigs slaughtered in the latest month was 5% higher than the same month in 2013, at 867,300 head. This was the biggest annual increase for any month since May 2012 and the average weekly kill during the month was the highest since December 2000, helped particularly by improved sow productivity and better growth rates this year. There was a 5% year-on-year increase in throughputs in England and a 4% rise in Northern Ireland slaughterings, while the numbers killed in Scotland remained unchanged from last year.

The number of adult boars and sows culled in November totalled 18,500 head, down 5% compared with the same period in 2013. This is probably the result of low cull sow prices, meaning producers are retaining sows which might ordinarily have been slaughtered. Certainly there is no sign that low pig prices are yet leading to producers reducing their sow herds. With clean pig carcase weights up by more than 2% in November to 82.2kg, another record, monthly pig meat production totalled 74,100 tonnes, the highest November figure since 1999. As such, pig meat production in November was 7% higher than the same month in 2013.

Little Change in German Pig Numbers

Provisional figures from the November pig census show that the number of pigs in Germany was little changed from a year earlier. The herd as a whole increased marginally to 28.2 million head. This was largely due to a 5% rise for young pigs, between weaning and 50kg, suggesting that the recent upturn in slaughterings may be sustained into early 2015. Many of these pigs would have been born at a time when optimism in the industry was higher; the breeding herd was up 1% year on year in the May census. In addition, weaner imports from Denmark and the Netherlands have been 8%, or 670,000 head, higher in the year to date.

In contrast, piglet numbers were 2% lower than a year earlier, while there was a reversal of the growth in the breeding herd recorded earlier in the year, with sow numbers down 1% since May and slightly lower than in November 2013. Gilt numbers were down even more sharply, by 3% year on year. This suggests that breeders are starting to rationalise their herds as finances have been very challenging since the summer. This is confirmed by German sow slaughterings having been up 5% year on year since pig prices began to fall in September. This indicates that there may be some tightening of supplies as 2015 progresses. The census also indicates that the decline in the number of pig farms has continued over the last year. The total number of German farms keeping pigs fell by 4% to 26,800, while breeding farms declined by 7% to 10,100.

Danish and Dutch Exports Expanding

In contrast to last year’s trend, total Danish pork exports were up 2% on the year, totalling 827,980 tonnes between January and September 2014, despite a small fall in production. However, due to unit price cuts across all the key markets, the value of shipments fell by over 1% to just under DKK14 billion (€1.88 billion) in the first three quarters of the year. This reflects trends in finished pig prices, with values in 2014 averaging 13 euro cents per kg lower than last year. Increasing volumes of pork were exported to Germany (up 3%) and Italy (8%), while beyond the EU, Japan received 27% more pork, China 5%, Australia 54%, and the United States 34% more. This helped to offset the loss of the Russian market, which accounted for 7% of Danish exports last year. Poland also took 11% less pork from Denmark, as it continued to increase its purchases of Danish weaners instead. According to Danish figures, pork exports to the UK were subject to stepped increases over the first nine months of the year, with a peak of around 9,800 tonnes in July; they reached just over 81,000 tonnes for the period as a whole, 13% more than a year earlier. However, this conflicts with UK import data which show a fall in shipments during the same period. Demark shipped 6% less bacon to the UK, contributing to a 5% decrease in Danish bacon exports overall. Processed pig meat exports to the UK were also lower.

The Netherlands also increased pork export volumes in the first three quarters of 2014, by 7% on the year to 574,000 tonnes. Italy maintained its leading position, increasing shipments by 13% as its own production diminished. Germany, however, took marginally less than the previous year, as did Greece. The UK continues to rely on Dutch pork to meet part of its demand, receiving an increase in volumes of 17% (although UK figures show a more modest rise). Exports to numerous Asian markets also increased on the year as demand continues to develop, more than offsetting the loss of last year’s limited sales to Russia. Growth markets included Japan, Korea, Taiwan and China. Despite a 3% fall in unit price overall, the value of exports was still 4% higher than a year earlier at €1.21 billion.

Feed Market Update

Over the festive period, UK May-15 feed wheat futures peaked at £140.75/t on 24 December, although they fell back to close at £136 on 2 January. Since then, prices have climbed again, reaching £139.20/t as at Tuesday’s close. Concern over winter kill in the US winter wheat crop has added some bullish sentiment to the market recently but it is too early to draw any conclusions on what this could mean for production. The market now appears to be getting more clarification on the Russian export situation. From 1 February, a 15% export duty plus €7.50/t will be introduced on wheat, adding to the competitiveness of EU wheat on the global market. UK rapemeal prices (34%, Ex-mill Erith, January delivery) were £191/t on Friday (2 Jan), up £3 from the last reported price on 19 December. May-15 Paris rapeseed futures settled at €355.25/t on Tuesday (6 Jan), up €5.50 week on week, with Chicago futures also higher. Concerns over the impact of dry weather in Argentina on soyabean yields have provided some bullishness to the oilseeds market in recent days. Technical trading and reports of further export sales of US soyabeans to China have also provided support to prices. To read more about the latest developments in the feed market click here.

UK Herd Figures Revised Down Marginally

Revisions to the final Defra June Survey figures do not materially alter the previously recorded trends in the UK pig herd. A slight decrease of 5,000 in the pig herd estimate was reported, keeping the change on the year at a reduction of 1%. Wales, Scotland and Northern Ireland had slightly more pigs than a year earlier, while England had fewer, bringing the revised UK total to 4.82 million head. The breeding herd fell more sharply, with the largest drop, of 13% year on year recorded for gilts in pig, suggesting a possible continuing decrease in the herd size. With maiden gilt numbers also decreasing on the year, there was evidently still some lack of producer confidence in the market.

December Pig Market Trends Out Now

The December edition of Pig Market Trends (PMT) was published just before Christmas. 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:

Consumer confidence. The UK economy is picking up speed, with GDP growth, low inflation, and falling unemployment, while earnings are now rising again in real terms. So, will this favourable news lead to a rise in retail sales? Find answers to this question and further analysis of consumer confidence and its impact on grocery sales in this article.

Cost of production. The estimated average cost of pig production during the third quarter was the lowest since 2010 and average producer margins remained positive. However, since then pig prices have continued to fall while feed prices have started to rise again, so many producers are likely to be close to their break-even point. This article provides further analysis of the latest cost of production estimates.

Emerging markets. Russia’s ban on EU pork imports has had a major impact on the pig market but EU exports have held up relatively well. Much of the excess pork was diverted to established Asian markets but most of the rest found markets elsewhere. In this article you can read analysis of these emerging markets and how sustainable they may be.

Spain. The June census suggests some optimism in the Spanish pig industry, due to good producer margins in the first half of the year. However, since the summer, prices have fallen to their lowest point in four years. In this article you can read our analysis of the Spanish pig market in more detail.

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

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