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AHDB Pig Market Weekly

12 March 2015

AHDB BPEX Pig Market Weekly - 12 March 2015AHDB BPEX Pig Market Weekly - 12 March 2015


EU pig prices start to recover

Throughout February the EU average pig reference price showed some significant upwards movement. In the week ending 1 March, the average price reported by the EU Commission was €143 per 100kg dw, up nearly €4 on the week. For the four weeks to the 1 March, the average price had increased by over €12 per 100kg, although the weakening euro meant this was equivalent to just 7p/kg. The speed of such an upturn has not occurred since the middle of 2013 and it has narrowed the gap with prices this time last year to around €7 per 100kg, in contrast to a €30 difference at the start of 2015. This change in direction can in part be attributed to some tightening of supplies, although this may only be a short-term situation. Additionally, the recent weakening of the euro is aiding export opportunities for EU product, balancing out the impact of its continuing exclusion from the Russian market.

Spanish finished pig prices increased by over €12 per 100kg in February, while Germany also remained a driver of price trends, up €17 per 100kg. Belgium, France, Poland, the Netherlands and Austria also all increased by over €10 per 100kg and Danish prices rose by €8. Ireland, however, only recorded an increase by €2 in the month, meaning its price has fallen below the EU average for the first time since September.

In the coming weeks, the EU market will be influenced by the introduction of Private Storage Aid for pig meat, which came into force on Monday. The scheme provides aid of between €210 and €305 for storage periods of between 90 and 150 days, with minimum quantities of 10 tonnes for boned products and 15 tonnes for other products. It covers all pork carcases and cuts but not fats and other by-products, which are reported to be where there is currently the greatest oversupply. Therefore, the impact on pig prices may be limited.

English pig herd grew in 2014

Latest figures from Defra show that the English pig herd increased by 2% in the year to December 2014. At 3.66 million head, the herd was at its largest size in at least five years. These figures suggest that the recent year-on-year growth in pig meat production is likely to continue in the short-term at least. This could mean that finished pig prices remain under pressure, although there is likely to be some seasonal tightening of supplies in the coming months.

In contrast, the figures record a 4% fall in the English breeding herd, compared with December 2013. The published number of 313,000 head would represent the smallest sow herd for over half a century. However, this figure should be treated with caution as the June survey showed an even bigger fall but that was not supported by subsequent clean pig slaughterings. The more detailed figures show a particularly sharp fall for in-pig gilts, which may be an indication that producers have been replacing fewer sows due to low cull prices. This is also supported by a rise in the number of suckling and dry sows.

UK pig prices

The week ending 7 March recorded another reduction in the EU spec GB SPP, of 0.48p on the week to 132.73p per kg. This was the smallest decrease so far this year, as was anticipated given stabilising prices across the EU and that there have been some reports of a tightening of supply. AHDB/BPEX slaughtering estimates confirm this, with throughputs back 1% on the same week last year. However the SPP continues to average around 30p less than the DAPP of last year, partly since cumulative slaughterings in 2015 are up by 2%. The average probe measurement this week was up to 11.4mm, the highest since the beginning of the year, in line with sustained heavy carcases. This is likely to be a result of continued low feed costs of good quality so boosting production even further.

For the week ended 28 February, the EU spec GB APP was down 0.80p to 136.89p per kg. This is a difference of 3.68p when compared with the SPP in the same week, slightly less than the gap of the two previous weeks.

The weaner markets were also broadly more stable than in recent weeks. 7kg weaners in the week ended 7 March averaged £33.20 a head. This was down 63p on the week, offsetting the last two weeks of increases as many contracts run cyclically. 30kg weaners averaged £44.81, only 1p down on the week and 43p up on the start of the year, perhaps as a levelling out of availability filters through the supply chain. Compared to this time last year however, breeders are still receiving £12 less for 30 kg weaners and £7 less for 7 kg weaners, given ongoing uncertainty about the finished pig market.

Better GB breeding herd productivity in 2014

In 2014, improvements in many aspects of the physical performance of the GB breeding herd helped to increase the overall productivity of sows. This led to higher pig meat production per sow than the previous year, based on analysis of latest data from Agrosoft. The average number of pigs born alive per litter rose to 12.1, up 0.2 compared with 2013. Along with a slight fall in pre-weaning mortality, this meant that the number of pigs weaned per sow per year increased to 24.1, up from 23.6 in the previous year. These two measures, combined with reduced post-weaning mortality, meant the number of pigs sold per sow per year increased accordingly, to 22.7 (up by 0.4). With carcase weights also rising, the amount of pig meat produced per sow rose by 3%, or 50kg, to 1,820kg in 2014.

These improvements were more prominent in the bigger indoor herd. For example, the number of pigs weaned per sow indoors was up 3%, or 0.7 pigs, on the year to 25.7. Indoor pre-weaning mortality was also down on the year, whereas outdoors it increased, widening the gap between the two. The number of pigs weaned per outdoor sow was only 0.1 higher than in 2013, at 21.8.

The performance of the feeding herd was also improved in 2014, contributing to the increased production. In particular, feed was converted more efficiently in both the rearing and finishing herd. The Feed Conversion Ratio (FCR) for the former was down from 1.75 in 2013 to 1.71 in 2014, while the finishing FCR fell by 0.11 to 2.67. This meant around 7kg less feed was used per pig last year, contributing to reduced feed costs. Daily weight gains were, however, little changed, with a small rise in the rearing herd offset by a modest fall in the finishing stage.

More detailed figures for these and other physical performance indicators can be accessed through the BPEX website, by clicking here.

Pork scratching about for retail sales

Pork sales for the 12-week period to 1 February recorded the largest drop in consumer expenditure of all meats, according to figures from Kantar Worldpanel. This reflected a fall in volume sales combined with a 7% drop in the average price. Leg roasting joints were the only roasting cut not to record a fall in volume sales over the period, with the amount purchased marginally up on last year. However, consumer spending on leg joints fell on the back of a 10% drop in average retail prices. This was driven by an increase in the amount sold on promotion, which was up to 62% of total sales, a 20 percentage point increase on last year.

Spending on cured and processed pig meat products also fell, while overall volumes were little changed compared with a year earlier. A slight fall in sausage sales was within the economy and standard ranges, while the premium-tiered range recorded a 7% increase in volume sales. This was consistent with the overall trading-up seen within the grocery market over the Christmas period.

Feed Market Update

May-15 UK feed wheat futures closed at £117.95/t on Tuesday, down £0.75 since the previous Tuesday’s close. Chicago May-15 wheat futures closed at $181.22/t on Tuesday, down $4.68 week on week. USDA revised global wheat stocks and production lower in its March supply and demand estimates, which were released on Tuesday and this had a slightly bullish effect on prices overnight (10 March). Defra cereal usage data, published last Thursday revealed that the proportion of barley used in compound feed production increased at the expense of wheat in January.

UK rapemeal (34%, ex-mill Erith) was £179/t as at 6 March, down £7 on the previous week. Brazilian soyameal, (48%), ex-store Liverpool was £346/t as at 6 March, unchanged on the previous week’s price. May-15 Chicago soyabeans closed at $361.71 on 10 March, down $10.19 since the previous Tuesday’s close. In terms of the outlook the Argentine 2015 soyabean harvest could well be revised down and US new crop futures prices are rising.

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

Global prices back to normal

Having risen to record levels through the middle of 2014, global pork prices had returned to more normal levels by the end of the year. The price hikes were driven by the impact of PEDv on global supplies, affecting one of the major exporters (USA) and several key importers (Japan, Korea and Mexico, among others). This took the average export price for pork (based on figures from the four major global exporters – EU, US, Canada & Brazil) to US$3.50 per kg over the summer, 13% above the previous record of $3.12. However, with the impact of PEDv waning and signs of production expanding in 2015, prices have subsided once again. By December, the average export value was down to $2.95, in line with levels for much of 2012 and 2013.

EU prices were largely unaffected by the rises elsewhere, mainly due to the Russian import ban, so EU pork was the cheapest in 2014, the reverse of the usual position. However, Canadian prices fell sharply after it too was excluded from Russia in August and ended the year close to those of EU exporters. Brazilian export prices also fell rapidly at the end of the year as the depreciation of the rouble decreased the amount Russian buyers were willing to pay in US dollar terms. Therefore, by December, US pork was the most expensive among major exporters. However, further falls in domestic prices in the New Year, taking them to a 5-year low, have brought the US into line with the other exporters. Coupled with the US dollar strengthening against the euro, Canadian dollar and Brazilian real, this suggests that further falls in the global average price, in US dollar terms, are likely in early 2015, possibly taking values to their lowest level in over four years.

Expanding herd supports strong Irish exports in 2014

During 2014, Ireland exported 148,000 tonnes of fresh and frozen pork. This was a 12% increase on 2013, bringing in €353.6million. Although average export prices did fall marginally overall, the drop was smaller than that recorded by most other major EU exporters. There was additional product available for export as almost 6% more pig meat was produced in 2014 than 2013 in Ireland. This was possible on the back of an increase in the breeding herd, indicating higher production is also to be expected in 2015; the total pig herd in December 2014 topped 1.5 million head for the first time in three years. Indeed, Irish imports were down by 3% as their own supply went further to meet domestic demand.

The EU as a whole increased its share of Irish exports on the year to 60%. The UK continued to be the main recipient of Irish pork in 2014, taking over a third of the total and 8% more than 2013, despite UK production also being up. This trade has in part been supported by the price difference, exaggerated by the depreciation of the Euro, making Irish product cheaper than UK pork. Germany took 5% less Irish pork, mainly affecting cull sow carcases, as the Russian import ban affected the balance of supplies across the continent.

With the loss of the Russian market, Ireland’s second largest buyer last year, more pork was directed to Asia, as well as the US. China retook second position, receiving 22,400 tonnes, up 8% on the year. Japan, South Korea and the Philippines all saw significant increases on the year as their own production, like the US, was affected by disease. Similarly, offal exports increased by almost a third on the year, predominantly to China, as well as to Hong Kong and the Philippines. These cuts are now worth nearly €20 million for Irish exporters.

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