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AHDB Pig Market Weekly

15 January 2015

AHDB BPEX Pig Market Weekly - 15 January 2015AHDB BPEX Pig Market Weekly - 15 January 2015


Lower prices not pulling in imports

UK imports of pig meat were again lower than a year earlier in November despite prices being well above those of the EU. Fresh and frozen pork shipments were down 5% year on year, at 31,400 tonnes, their lowest level in November for six years. The decline was mainly due to reduced volumes from Germany and the Netherlands, although more Danish pork reached the UK. Unit prices were 15% lower than in November 2013, a similar scale to the decline in EU pig prices. Bacon and ham imports also declined, with 10% less entering the UK in November than a year earlier. All three of the major suppliers experienced declines, despite prices also being down by around 15%. Sausage imports were up slightly but this is compared with an unusually low figure in November 2013 and volumes were 11% down on two years before. Imports of processed products such as cooked hams were virtually unchanged from last year.

UK pork exports during November were 16% down on the same month in 2013. This was largely due to some temporary disruptions which were quickly resolved, with trade returning to normal by the end of the month. These affected volumes to most of the major recipients of UK pork, although the sow meat trade to Germany was unaffected and shipments were similar to those a year before. With unit prices also significantly lower, the value of pork exports during the month was nearly a quarter lower than in November 2013, totalling £16.2 million. The impact of the disruption on the offal trade was less apparent, with exports virtually identical to November 2013 at 3,400 tonnes. With prices higher, the value of this trade during the month was up 18% year on year at £3.3 million.

Falling prices fail to deliver sales uplift

Despite a fall in average retail prices by over 6%, the amount of pork bought in the latest 12-week period, ending 7 December, fell by 4% over the year. According to Kantar Worldpanel, there has not only been a fall in the number of households buying pork but consumers have also reduced the frequency of their purchases. All of the red meats experienced falling volume sales for the 3-month period, with consumers switching away from fresh red meats in favour of convenient meal options and fish. The fall in pork sales was, in large part, spread across retailers. Only one of the Big 4 recorded a slight increase in pork sales, while the Hard Discounters, which have seen their share of the grocery market grow over the year, also showed an uplift in sales.

Chops/steaks again experienced a fall in sales, whilst within roasting joints, gains in volume sales of leg and shoulder were offset by declining loin purchases. Mince which has been a strong performer of late registered a static performance. Following the seasonal trend, bacon and sausages both recorded a small increase in volume sales over the last couple of months. However, sales for both remained down on the year and the seasonal increase, particularly for bacon, has been less marked than the previous two years.

UK pig prices

For the week ending 10 January, the EU-spec GB SPP was down 0.74p on the week to 141.70p per kg. Carcase weights, at 83.20 kg, were at their highest since the SPP series commenced in April 2014 and effectively represented an all-time high. However, the average probe measurement decreased to 11.3mm, the lowest since the beginning of October. These changes partly reflect a backlog of pigs held over from the festive period that put on weight but suggest that his has been done without their condition suffering. Throughputs were up 42% on the week as processing activity largely returned to normal, although there are still indications of a backlog of pigs in the system. While also being up 10% on the year, slaughterings have not returned to their pre-Christmas peak, with reports indicating poor retail demand with fewer additional spot purchases which has contributed to the price fall.

The EU-spec GB APP was 145.44p per kg for the week ended 3 January, 1.53p down on the week. This kept the difference with the GB SPP in the same week to 3.0p.

For the week ending the 10 January, 7kg weaners averaged £34.38 a head, down 28p on the week. This is almost £8 less than the breeder received a year ago, as weaner prices track the downwards trend in UK finished pig prices. It also confirms some uncertainty in the demand for and price of finished pigs come the spring. 30kg weaners in the same week averaged £47.85 a head, up £3.47 on the week but down £9 on a year earlier. This largely cancels out the price fall of last week and compared with Christmas week the price was down 37p.

Producer price share lowest of year in December

During December of last year, the producer share of the final retail price of pork remained at 38%, only slightly down on the previous month, according to AHDB/BPEX estimates. Farmgate prices continued to fall to the lowest of 2014 but retail prices were also discounted for the festive sales. However, with farmgate prices falling slightly faster, the two prices continued to diverge in December, with the highest percentage difference between them since early 2012. This combination meant that the producer was receiving 5 percentage points less than in December 2013. The producers’ share of the bacon retail price in November fell slightly to 34%, back nearly 4 percentage points on the year, as the spread between farmgate and retail prices also grew.

In light of both an increase in demand for certain pork cuts in the run up to Christmas, as well as retailers dropping prices to attract maximum holiday sales, there was some movement in retail prices in December. Most notable was the 4% drop for boneless leg joints, for roasting, to their lowest price since 2011. However, this was in part offset by a 4% rise in traditional sausage prices. All reported cuts, with the exception of loin chops, were cheaper in December 2014 than 2013, reflecting the downward trend of most meat prices seen throughout much of last year.

A year to forget in 2014 – what about 2015?

From a price point of view, 2014 will be a year to forget for UK pig producers. A combination of factors contributed to the price declines but things could have been worse. The EU market recorded even bigger price falls although lower feed prices supported producer margins. In addition, disease problems which affected other parts of the world didn’t make it to our shores. Some of the factors influencing prices are unlikely to change in 2015, meaning that the coming year could again be a tough one for producers. However, some things could change, either for better or worse. To read our review of the pig market in 2014 and what trends last year can tell us about what to expect in 2015, click here.

Feed market update

Having come close to the £140/t mark on 7 January, UK feed wheat futures have since dropped to a 4 week low. May-15 futures fell through most of the week, closing at £133.65/t on Tuesday, down £5.55 on last Tuesday. Markets fell despite further details emerging of Russia increasing informal grain export taxes. Market sentiment was overwhelmed by the release of new USDA data showing large global stocks. This bearish news has brought the fundamentals of supply and demand back into focus. In the UK, Defra figures suggest it seems unlikely that lower prices for feed grains will result in improved demand. UK rapemeal (34%, ex-mill Erith, December delivery) was £202/t on Friday, up £11 on the previous week. Hi-Pro soyameal prices (ex-store East Coast, December delivery) averaged £335/t, £3 lower than the previous quotation of mid-December. Latest US soybean production figures have increased previous stock estimations by just over 1.5Mt. This, combined with higher Brazilian crop expectations and weak crude oil prices, creates a bearish environment for oilseeds going forward.

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

Brazil continues to increase exports to Russia

Total pork exports from Brazil were 21,250 tonnes (5%) lower in 2014 than 2013. However, the end of the year has seen no let-up in the momentum of Brazilian pork exports destined for Russia, as they adeptly fill the market space left by banned EU and Canadian product. Latest figures show that almost 186,000 tonnes of pork were exported to Russia in 2014, over 40% of total Brazilian exports. This is 51,500 tonnes (38%) more than in 2013 and has been shaped by the second half of the year, with 23,000 tonnes more delivered in the final quarter of 2014 than the first. Russia took over half of Brazilian shipments in October-December 2014, despite prices having nearly doubled in rouble terms compared with a year earlier. Such growth has been possible to some extent due to the redirection of pork previously destined for Ukraine prior to the ban initiated during 2013.

Title Other key export destinations remained strong, with increasing shipments to Angola and Singapore among others. Trade with Hong Kong, Brazil’s second largest market, did diminish slightly over the course of 2014, but Brazil did build up some smaller markets in Asia, such as the Philippines, Thailand and Japan. With the Brazilian Real continuing to weaken and with global supplies tight due to PEDv, pork unit prices were consistently up on the year. Accordingly, the value of Brazil’s pork exports in 2014 totalled R$3.4 billion, almost 28% more than 2013, despite the decrease in total volume. Challenges remain in accessing new markets, in the form of meeting welfare standards and avoiding disease threats. However, the strength of demand from Russia is likely to mean that it will remain the dominant buyer of Brazilian pork until well into 2015.

Industry prospects in focus at AHDB Outlook 2015

Prospects for the pig sector, along with the other major UK livestock sectors, will come under the spotlight at the 2015 AHDB Outlook Conference. The conference − hosted by AHDB’s three livestock divisions, BPEX, EBLEX and Dairy Co, as well as AHDB Market Intelligence − will be held at One Great George Street in Westminster on Wednesday February 11. Trade developments and emerging opportunities are due to be examined, with experts also giving an overview of the market outlook for each sector represented at the event. AHDB chairman Sir Peter Kendall will open the conference, which will also include keynote presentations on the potential for exports to the Far East and on developments and forecasting of consumer trends. Places are limited so if you are interested in attending you should book as soon as possible to avoid disappointment. For more details and to book your place at the conference, click here.

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