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AHDB Pig Market Weekly

19 February 2015

AHDB BPEX Pig Market Weekly - 19 February 2015AHDB BPEX Pig Market Weekly - 19 February 2015


Opportunities in focus at Outlook Conference

Last week’s AHDB Outlook Conference highlighted some of the opportunities available to the UK meat industry. The conference was opened by new AHDB Chief Executive, Jane King, who spoke of the role of AHDB in enabling UK agriculture to improve productivity to compete with the leading nations. She highlighted the example of Denmark, in particular, where there was a more joined up approach to improvement.

The first keynote speaker, Richard Nicholls from the Future Foundation, considered key trends for consumer markets over the next 5 years. Among the areas covered was the re-emergence of health issues, although salt and sugar seem to be more of a focus than fats at the moment, which could benefit the red meat sector. He also considered how new technologies were changing the way consumers shopped and their rising expectations, for example around personalisation. Richard also highlighted some of the opportunities from emerging markets, with their increasing ‘middle classes’ demanding more high quality food.

This theme was developed further by the second speaker, Nick Miles from the Institute of Grocery Development (IGD). His presentation focused on Asian markets and, in particular, the rapid development of modern retail in the region. With four markets in the global top 10 and ten in the top 30, Asia has great and growing importance. Modern retail is still limited in most countries but is increasing rapidly. However, the marketplace is still highly fragmented and competition between retailers is fierce. This makes it a challenging but potentially rewarding place to do business.

The conference concluded with three breakout sessions, including one covering pigs and poultry. This featured presentations on the outlook for pig meat supplies and an overview of the state of the poultry sector. The former included analysis of the latest AHDB/BPEX supply forecasts, which featured in last week’s Pig Market Weekly.

Short video summaries of each of the conference presentations are now available, by clicking here.

Producer share of retail price starts New Year at a low

January saw a drop of one percentage point on the month in the share of the final retail price of pork received by the producer, to 37%. This is the lowest proportion since January 2009 and is 5 percentage points down on the same month last year. This decrease has been driven by continued falling farmgate prices, which has increased the gap to retail prices, where some stability was evident during the month. Over the year, farm gate prices have fallen much faster than the retail price, in percentage terms, according to AHDB/BPEX estimates. The producer’s share for bacon followed suit and dropped to 33% in December, down over 1 percentage point since November and 3 points on the year. Farmgate prices fell, as for pork, but bacon retail prices increased on the month, creating the widest gap between the two over the year.

After the festive sales, in January retail prices for the majority of pork cuts decreased slightly. The price of sausages, in particular, dropped by around 4%. Fillets, mince and roasting joints also decreased on the month. Loin steaks, however, increased by around 2%. All these cuts were cheaper than last January, apart from loin chops which have sustained consumer demand allowing prices to increase by 16% year on year. However, as cuts based on the loin are already the most popular, the effect of these price movements on the overall carcase price at the farmgate remains a challenge.

UK pig prices

The EU-spec GB SPP in the week ending 14 February fell again, by 2.66p, to 135.06p per kg dw, the largest weekly decline since the series was introduced in April last year. There have been some significant reductions in the prices reported this week and we have contacted the relevant contributors in order to confirm that their submissions are accurate. Market conditions have not been favourable, mainly as a result of the poor demand although supply was still running well ahead of last year. Carcase weights were unchanged on the previous week, averaging 82.81 kg, while the average probe measurement fell slightly to 11.2mm.

Estimated slaughterings in GB amounted to 178,400 head and, while they were 4,100 head lower than in the previous week, they were still were as much as 16,000, or 10%, higher than a year earlier.

For the week ended 7 February the EU-spec GB APP averaged 141.36p per kg. At 1.97p down on the week, this was also the largest weekly change since the price series began in April 2014 and also reflects the weakening market. There was even a narrowing of the gap with the SPP for the same week to 3.64p.

On a positive note there are signs that the sow market on the continent is picking up and last week the German price increased 4 cents per kg, helped by some recovery in the clean pig market. However, UK sow meat exporters now have to contend with an appreciating pound.

For the week ending 14 February, the weaner market followed finished pig price developments. 7kg weaners averaged £33.21 per head. This was 36p down on the week and remaining almost £8 down on the year. 30kg weaners, after a partial recovery the previous week, dropped again, by £1.50, to an average of £44.42 per head, with the differential for the producer edging towards £11 less than a year ago.

So far in 2015 the price of 7 kg weaners has fallen by £1.45 with small reductions in most weeks. In contrast the market for 30 kg weaners has been somewhat more volatile. Prices increased initially but have since fallen back.

US and Canada had less pork to export in 2014

Throughout 2014, pork trading in the US followed the trend of the previous year, with imports increasing by 18% while exports were down 1%. This reflects a growing domestic demand, which could not be met by disrupted domestic production due to disease. However, with limited availability but sustained demand, unit export prices for US pork were up 11% on the year and by much more than this in the middle part of the year. This brought the total value of pork exports in 2014 to $4.9billion. Mexico continued to be the leading importer of US pork, increasing the volume taken by 12% on 2013, as its production was hit by PEDv too. Japan, while still in second position, received 8% less US pork. South Korea expanded its intake by 37%, overtaking China, as pig productivity was also disrupted by disease and poor producer margins. US exports were particularly sharply down in the second half of the year, as Japanese and Chinese markets weakened, partly due to increased competition from cheaper EU pork, aided by the weakening of the euro against the dollar.

Canada followed suit with exports falling 3% on the year, although imports were also down 4%. With PEDv reasonably contained, production has not been as drastically disrupted as in the US. However, unit prices have increased in line with US prices, pushing the value up to C$3.1 billion for the year, with the fourth quarter providing the greatest volume of exports. Canada played a part in meeting the US and Mexican shortfalls, with deliveries up 12% and 23% respectively. The impact of the Russian ban has meant Canadian exports to this market were little changed overall, having doubled in the first half of the year after the EU ban and then dropped sharply in the second half when Canada, in turn, was banned. There were varying trends for Asian markets as Canada faced increased competition from EU pork but was able to divert supplies which would previously have been destined for Russia.

Denmark reports increased breeding herd

As at 1 January 2015, Statistics Denmark reported a 2% increase on the year of the country’s total number of pigs, to 12.7 million head. This is a slight seasonal decrease on the October 2014 figure, which had seen the herd reach its largest size since 2010. The breeding herd increased by 1% on the year, being made up of more in-pig sows, suggesting an increase in the number of young pigs can be expected in the next quarter. In addition, while the number of in-pig gilts remained stable on the year, they were up on October. Maiden gilt numbers, however, were down 10% on the year, which may suggest there is caution about any further expansion, given the low prices and poor profitability of recent months.

Piglet numbers were reported to be similar to last year in January. Weaners (under 50kg) though were more abundant, at 5.7 million head, up 7% on the year. As slaughter pig numbers, however continued to fall, it is evident that the weaner export industry remains robust despite the continued pressure on finished pig prices throughout the main buyers of Danish weaners. This suggests that the downward trend in Danish slaughterings is set to continue into 2015, despite further increases in piglet production.

Feed Market Update

It’s been another fairly quiet week in the grains market, with UK feed wheat futures gaining some upward momentum after Thursday’s (12 Feb) close. On Tuesday (17 Feb), UK May-15 feed wheat closed at £125/t, up £0.75/t on the week. Chicago May-15 wheat futures gained $2.76/t on the week to close at $207.95/t on Tuesday. Chicago maize futures (May-15) followed the trend closing $0.59/t higher compared with the previous week at $156.00/t.
Protein meal prices fell once more on the week, with UK rapemeal (34%, Ex-mill Erith, February delivery) £187/t as at Friday (13 Feb), down £2/t from the week before. Hi-Pro soyameal (Ex-Store, East Coast, February delivery) was £315/t, down £15/t from the last recorded price (30 Jan). Chicago May-15 soyabean futures gained $13.78/t on the week to 17 February, closing at $371.72/t. The oilseeds market lacks direction at present although the supply situation is positive with a record South American crop expected and strong sales of US soya beans.
To read more about the latest developments in the feed market click here.

High December trade but EU exports lower in 2014

December trade figures from Eurostat indicate that EU-28 fresh and frozen pork exports were up on a year earlier at 130,500 tonnes. However, overall exports for 2014 as a whole experienced a fall of 2% compared with 2013, to less than 1.6 million tonnes. As has previously been reported, the impact of the Russian ban, which began in February, resulted in a 95% decrease in EU exports to this market last year. However, it is evident that the majority of this product found alternative markets in Asia. In December, the top four destinations for EU pork were Asian markets, with a 62% market share. Similarly, over the year the top five markets, all in Asia, accounted for 66% of EU exports. Consistent, rapid growth has been seen in South Korea partly due to disease affecting its own production. China imported slightly less on the year, and Japan overtook it, increasingly choosing EU pork over US product because of a change in price relativity. Exports to Australia also increased significantly on the month and the year.

In light of the problems on the Russian market which even contributed to falling finished pig prices in the EU export unit prices were down on the year by an average of 1%. Consequently, the value of these exports for 2014 fell 3% to €3.7 billion.

Offal exports followed a rising trend, being up 8% on the year to nearly 1.1 million tonnes, with even stronger growth in December. China continued to be the main recipient, increasing both in December and over the year. The Russian ban appears to have had less of an impact on EU offal exports than on fresh and frozen pork, as Asia readily absorbed larger quantities, some of which was higher in price, increasing the value of offal exports in 2014 to over €1.2 billion.

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