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AHDB Pig Market Weekly

22 January 2015

AHDB BPEX Pig Market Weekly - 22 January 2015AHDB BPEX Pig Market Weekly - 22 January 2015


EU pig prices still falling

The close of the year did not bring good news for European pig producers, with continual price drops seen in most of 2014, concluding at an average for €135 per 100kg dw during the 4 weeks ending 28 December. This is about €25 less than in the first month of the year. Pressure has been kept on the market by disease issues, the Russian ban and, latterly, ample supplies. Average prices did recover a little from April to July, in part as opportunities arose while US exports were limited by PEDv losses and markets expanded in Asia. However, this was short lived, with prices consistently falling week on week from August onwards. Slaughterings were up in many key markets as producer efficiency carried on moving forwards but demand has not grown to absorb this additional production. As such, 2014 prices persistently tracked below 2013. The New Year has brought no change, with prices averaging €131 per 100kg in the week ended 11 January, down €28 on this week last year.

While the downward trend was seen across the board, key producing countries have played a large role in driving the declines; many have dropped around €10 in the last 2 months, including the UK. German prices ended 2014 at €135 per 100kg, €22 lower than a year earlier, and fell again in the New Year. Danish, Belgian and Dutch prices have shown similar movements over the last 12 months but prices have been stable in the former in the early weeks of 2015. The UK remains the highest priced major producer, ending 2014 at €180 per 100kg. As the EU average price has fallen, the UK has managed to retain its premium, expanding the gap between the two prices from an average of €14 in 2013 to €35 in 2014. The gap might increase further following the weakening of the euro last week, after the Swiss Franc was decoupled from it. This could be enough to push the EU average price below £1/kg in sterling terms for the first time since early 2008.

High supplies continue in December

Latest figures from Defra confirm that UK pigs were in plentiful supply during December. Clean pig slaughterings were 5% higher than a year earlier during the month, totalling 795,800 head. This indicates that productivity continues to improve and that growing conditions have been favourable, confirmed by carcase weights averaging a kilo and a half heavier than in December 2013. The figures also suggest that, as suspected, the UK herd has been more stable than was indicated by the decline recorded in Defra’s June survey results. The new figures mean that the total clean pig kill for the year was 10.22 million head, 2% up on 2013 and the highest level since 2002.

Throughout the second half of last year, adult sow and boar slaughterings had been below year earlier levels and this continued in December, with throughputs down 3% at 15,500 head. This meant that, at 242,600 head, 4% fewer adult pigs were culled in 2014 than the previous year. This made little difference to pig meat production, which was up 6% in December and 3% for the year as a whole. December’s figure of 66,400 tonnes was the highest for this time of year since 1999, while the annual total of 862,000 tonnes was last exceeded in 2000.

UK pig prices

The EU-spec GB SPP for the week ended 17 January averaged 140.82p per kg. This is a slight fall of 0.88p on the week and the price has already dropped over 3p since Christmas. Declining prices are normal at this time of year as consumer demand is subdued, while pigs are in plentiful supply after the holiday period. Both carcase weights and probe measurements remained the same as last week, indicating a good number of pigs were still meeting specification despite carcase weights averaging over 83kg. A throughput estimated at 174,300 head for the week was an increase of over 1% on the year but a significant decrease on the previous week, as processing operations have started to return to normal with no lingering festive backlog. Nevertheless, cumulative slaughterings for the first three weeks of the year are estimated to be up 9% on this stage last year.

The EU-spec GB APP was 144.50p per kg for the week ended 10 January. The week-on-week decrease of almost a penny narrowed the price gap with the GB SPP for the same week to just 2.8p, the smallest difference since September.

For the week ended 17 January, 30kg weaners averaged £46.12 a head, down £1.73 on the week. This implies that trade for the spring remains uncertain, particularly as the pound strengthens against the euro, possibly giving rise to an increased price gap between EU and UK pigs. 7kg weaners also fell back on the week by 58p to £33.80 a head. This gives the breeder almost £10 less than in the same week last year, the same as the loss for 30kg producers, as the market continues to progress cautiously in light of falling finished prices.

EU pork exports down in November

Exports of pork from the EU were down on a year earlier in November 2014, by 4% to 145,000 tonnes, which was 25,000 tonnes less than October’s peak. South Korea was the second largest market for EU pork in November, having more than doubled its purchases on the year, as its own herd continued to suffer from PEDv, as well as some cases of FMD. China, however, remained the leading recipient of EU pork, despite a 1% fall on the year. With a unit price increase of 11% compared with last November, the value of shipments to China increased to €46million for the month. Unit prices for Japan, on the other hand, fell by nearly 3% as supply from the US regained momentum and EU shipments decreased by 19%. Hong Kong took 7% less pork on the year but prices increased by 10% as higher value cuts are in demand by the food service sector. As the impasse with Russia remains, emerging Asian markets continue to be the key alternative destination for EU pork with the Philippines and Taiwan prominent during the month. Slight increases in shipments to the US and Australia are also helping, while Venezuela is taking more from the EU as its main supplier, Brazil, is now trading more with Russia.

In contrast, overall pig offal exports from the EU increased for the period January to November 2014, reaching over 100,000 tonnes in November. Asia continues to dominate, with the top five market destinations for offal. As with fresh and frozen pork, trade to China led the way in November, with a value of €59million. While trade was down on October, increasing unit values across the board have held up the value of this market on last year and indicate sustained demand.

US production set to boom in 2015

Throughout 2014, the US pig industry was dominated by the impact of Porcine Epidemic Diarrhoea Virus (PEDv). This led to a dramatic rise in piglet mortality, reducing pork supplies and taking prices to new highs. Although PEDv is still around, the number of cases so far this winter has been much lower. Assuming this remains the case, the situation in the US industry is likely to be very different in 2015.

To read our analysis of prospects for the US market in the coming year, click here.

Feed market update

The value of UK feed wheat futures has dropped to a two month low following two weeks of steady decline. May-15 UK feed wheat futures closed at £130.50/t on Tuesday 20 January, down £3.15 on the previous week. The UK market trend is typical of other wheat futures. Contrary to expectations, strong UK maize imports have continued. At the same time, HMRC revealed that wheat exports for November were down 12Kt in comparison to October, although the UK remained a net-exporter. Strong exports are needed to reduce the potential carry-over into 2015/16. However, the weakening euro is making UK wheat less competitive on the European market. The value of the euro fell sharply last week as speculation grows that the European Central Bank is set to announce a hefty economic stimulus package. The currency hit a 10 year low against the US dollar and was at its lowest level against the pound since March 2008.

Hi-Pro soyameal (Ex-Store East Coast delivery) was £319/t (Friday 16 Jan), down £16 on the previous week. UK rapemeal (34%, Ex-mill Erith, December delivery) was £197/t, down £5 from last week. Concerns over the Chinese cancellation of US orders and the expectation of record production in Brazil have had a bearish effect on the market.
To read more about the latest developments in the feed market click here.

How do weaner prices respond to pig & feed prices?

In recent months, weaner prices have followed the same downward trend as finished pig prices. This has come despite feed prices being at a relatively low level. It is unsurprising that these two factors are the main determinant of weaner prices. Feed represents at least 70% of costs for finishers, other than the cost of the weaners, and finished pig prices determine their income. So how do weaner price levels relate to the other two prices?

New analysis suggests that weaner prices are set in a rational way, with the market weighing up the balance between finished pig and feed prices. To read about the results of the analysis, click here.

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