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AHDB Pig Market Weekly

19 March 2015

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


Small increase in EU pig kill in 2014

Complete 2014 data for EU pig slaughterings and pig meat production from Eurostat confirm industry reports from across the continent, that supply was plentiful throughout the year courtesy of improving physical performance and favourable feed costs. In December 2014, 22.1million pigs were slaughtered, up 8% on November and up 6% on December 2013. Cumulatively in 2014, 248 million pigs were slaughtered, almost 1% more than 2013. As a result of this increased kill, production was up by a similar amount and totalled 22.1 million tonnes as carcase weights were largely unchanged. As alluded to in the EU Short term outlook (see below) an increasing production trajectory is set to continue.

The additional kill reported in December 2014 compared with the previous month was seen primarily in some of the biggest producing member states; France (14%), Germany (13%) and Poland (12%). Similar developments compared with December 2013 also took place. For 2014 as a whole slaughterings were largely unchanged in Germany and France. In contrast they were up by as much as 4% in Spain and the Netherlands while in Poland the increase was even higher at 7%.

In contrast there was a decline of 2% in Denmark. This was due to the increasing export of weaners and finished animals for slaughter in neighbouring countries, and supports recent announcements of further slaughter capacity reductions by Danish Crown and the takeover of Tican the second largest pig meat processor in Denmark. Kill for the year was also down slightly in Belgium and Austria. Although Italy recorded a sharp decline of 17% based on official data there has been a change in the series and data from other sources suggests the true fall was nearer 1%. Other smaller producing countries showed varying trends. The UK, with the ninth highest kill, was up on the year by 2% while Ireland expanded by 5% with both countries showing a similar increase in slaughterings in absolute terms.

Falling farmgate prices reduce producer share of retail price

The producer’s share of the final retail price of pork in February was 36% according to BPEX/AHDB estimates. This is one point down on the month, a continuation of a downwards trend since October last year, and is six points back on the year. The most recent drop is due to the continued falling farmgate price for finished pigs, as retail prices have remained broadly stable for the last quarter. In January, the producer share for bacon was still less than pork, at 34%. Although this was just under one point up on the end of 2014, as retail prices were cut quite sharply, it is four points down on the year, reflecting the continued fall in farmgate prices.

Of the most popular cuts, traditional pork sausages were discounted the most in February by retailers, with prices being around 2% down on the month, according to the latest AHDB price survey. Other cuts were less affected, for example loin chops/steaks and minced pork prices were up less than 1%, while boneless leg joints and fillet prices eased by less than 1%. In a year on year comparison, however, the trend puts all cuts as cheaper now with the exception of loin chops. Again sausages and boneless leg joints have the biggest price differential, falling by 11% and 9% respectively.

UK pig prices

The EU spec GB SPP averaged 132.65p per kg for the week ending 14 March. This was only 0.08p down on the previous week and as expected showed the smallest week on week decrease for some time. This follows the more substantial price falls during most of the last nine months. This slight easing comes as the industry reports a seasonal tightening in supplies, at the same time as Easter procurement for fresh product takes place, resulting in some examples of spot prices increasing. In addition positive finished pig price movements on the continent a fortnight ago are now filtering through into prices in Great Britain, despite a further fall in the EU reference price last week. Slaughtering estimates from AHDB/BPEX for this week show that throughput has indeed decreased on the week, although remains above this time last year. Production increases should however be limited, as carcase weights fell marginally on the week to an average of 82.66 kg. The probe measurement adjusted down accordingly to 11.2mm and in line with the average since the SPP began.

The EU spec GB APP for the week ended 7 March averaged 136.25p per kg, down 0.64p on the week, the smallest decline in a month. This decrease continued to narrow the gap with the SPP in the same week to 3.52p per kg.

Both the 7kg and 30kg weaner prices fell in the week ending 14 March, reaching their lowest values so far this year. 7kg weaners fell by 16p to £33.04 a head, £8 down on the year. 30kg weaners averaged £44.59, down 22p on the week. This is nearly £11 back on the year, once again buyers remain mindful of the instability in the finished pig market.

EU meat production expected to increase

The latest EU Commission short-term outlook report alludes to a positive marketplace for livestock sectors, with production set to grow for all meats in 2015. The pig and poultry sectors, where feed can account for two thirds of costs, will benefit from lower costs given record cereals harvests. EU maize harvests in 2014 were up 14% on the year and oilseed production was up 11%. The weakening position of the euro against the US dollar has allowed meat products to be exported at competitive prices elsewhere, especially to Asia. Last week’s opening of the Private Storage Aid for some pig meat cuts is also designed to alleviate any over-supply, supporting a faster recovery of output product prices and thus improving producer margins.

The outlook report suggests the pig sector will see a “continuous recovery in production” in the short-term, aided by the low feed costs and continued improvements in productivity. Disease has been a recent limiting factor for some EU herds but Polish production, for example, has reportedly increased by 9% on 2013 despite ASF outbreaks. The implementation of new welfare measures for breeding sows has been credited with leading to an increase in piglet production in some countries and ultimately an increase in pig meat production. With the latest EU census reporting an increase in the breeding herd overall, increased production looks set to continue in 2015 and 2016. With per capita consumption likely to remain relatively stable after increasing in 2014, this will mean more product being exported, offsetting the decline recorded in 2014.

Mixed picture for EU pig meat consumption

Last year there were contrasting developments for household purchases of pig meat in the different major consuming countries. Demand though was helped by somewhat stable retail prices given the fall in the finished pig market. In 2015, the expected ongoing favourable supply and price situation would suggest that pig meat consumption should hold up in the EU.

Germany is by far the largest pig meat market and although the average retail price of fresh pork was down by almost 2% household purchases still fell by 2%. The barbecue season was disappointing although demand was even subdued during the colder months of spring and autumn. Purchases of processed products and average prices were down by a similar amount. Pig meat lost market share to beef last year although not to poultry meat. Italy is the second largest pig meat market and fresh pork purchases declined by as much as 6% in January-November in spite of no change in prices. In contrast salami purchases were up by 2% helped by a price decline of 3%. Families in particular cut back on their fresh pork purchases because their overall spending was under so much pressure and some concerns about the health aspects of consuming pork.

In France, household purchases of fresh pork increased by over 1% in response to stable retail prices and unlike in previous years it took market share from other meats, even poultry meat, all of which experienced a decline in purchases. Purchases of charcuterie, led by cooked ham, also held up and were unchanged on 2013. The Spanish meat market was especially difficult last year yet fresh pork household purchases were only down by 1% based on data to November taking market share from all other meats as total meat purchases were down by 4%. However, the processed meat market, a large proportion of which is pig meat based, was more difficult with volume purchases down by 6% even though retail prices were unchanged.

Feed market update

UK feed wheat had a bullish week with futures prices bouncing back above the £120/t mark. May-15 contracts were £121.25/t at close on Tuesday (17 March), up £3.30/t since the previous Tuesday’s close. Chicago maize May-15 contracts fell sharply, closing at $146.06/t on Tuesday down $6.70/t week on week. Closer to home, June-15 Paris maize futures prices have been on the up, at €164.75/t on Tuesday, a gain of €2.75/t over the week. French maize prices remain higher even when converted to dollars which could provide support for EU and UK wheat which has had increased competition from maize in feed demand recently.

In the UK there has been an unusual price carry from the old crop to the new this marketing season. Essentially this is a function of heavy EU feed grain supplies and poor export pace from the UK. With insufficient demand, the old crop market has to discount to the new crop and so recently the new crop premium over the old crop has been increasing. In addition, feed grain production in Europe is likely to be lower in 2015, supporting new crop prices relative to the spot market.

UK rapemeal (34%, ex-mill Erith) was £181/t as at 13 March, up £2/t on the previous week. Brazilian soyameal, (48%), ex-store Liverpool was £349/t as at 13 March, up £3/t on the previous week’s price. May-15 Chicago soyabeans have fallen to their lowest since October closing at $361.71 on 17 March, down $11.03/t since the previous Tuesday’s close. The looming South American soyabean harvests continue to be the main focus of the market’s attention but the situation is far from confirmed yet and some forecasts are being revised downwards.
To read more about the latest developments in the feed market click here.

Canadian herd recovered from PEDv

A 2% increase in the total number of pigs has been reported in the latest Statistics Canada livestock estimate, for January 2015, compared to a year previously. The total Canadian herd is now 13.2 million head. This increase has occurred despite some outbreaks of PEDv in 2014, demonstrating the industry coped well and the impact less disruptive than it was in the US and continues to be in Japan and South Korea. The breeding herd is up marginally on the year, meaning overall productivity is anticipated to grow going forward. So far this has resulted in a 1% increase in the number of piglets on the year, despite PEDv causing a decrease in the first six months of 2014.

Although slaughterings were down on the year to 20.5 million head, as more weaners were exported to the US, the number of pigs being kept for slaughter at 1 January 2015 increased by 2%, reaching almost 12 million. Processing capacity may need investment in order to cope if such annual growth carries on and, with a 5% increase in the heaviest pigs (over 81kgs) on farms in January, an increase in slaughterings in the short term is inevitable. Note that these reported herd increases this January have had only a limited impact on the longer term trend of declining numbers since 2005.

Falling US pig meat consumption

The United States is the second largest pig meat market after China and per capita consumption has fallen back by 8% since 2009. Inevitably both production and consumption developments in the US impact on the global pig meat market. Last year per capita disappearance, based on taking a supply balance of production and trade, declined to 21 kg retail weight with a tight supply situation and increased retail prices contributing to this development. Increasing pig meat exports, which account for over 20% of US production, and strong competition from poultry meat have exacerbated this development in recent years.

However, the latest United States Department of Agriculture forecasts for 2015 indicate a rebound in per capita consumption possibly by as much as 1 kg accompanied by expected lower retail prices compared with current levels. This is on the back of an expected recovery of 6% in domestic production after the decline of 1% in 2014. On the other hand consumption is still not expected to return to 2009 levels.

The overall average retail pork price has actually started the year at 6% above that of a year earlier. The wholesale market though is already coming under pressure and so far this year the average price has already fallen by 17%. This reflects the increasing supply of finished pigs and the USDA is forecasting a reduction of up to 30% in the finished pig price for 2015 as a whole. The price could even be at its lowest level since 2010 putting considerable pressure on pig producers after the record year of 2014. A retail price adjustment is inevitable in order to clear the extra supplies even if retailers try to hold on to the good margins on pork they achieved last year.

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