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AHDB Pig Market Weekly

26 March 2015

AHDB BPEX Pig Market Weekly - 26 March 2015AHDB BPEX Pig Market Weekly - 26 March 2015


Fewer UK sows but more pigs to finish

Publication of UK figures from the December 2014 Livestock Survey confirms that the pig herd is expanding, with an overall increase of 3% on the year. This brings the total number of pigs to 4.5 million head, the highest December population since 2008. This is primarily the result of feeding pigs, of which there were 4% more on the year, topping 4 million head and contributing to corresponding increases in pig meat production. As previously published, Northern Ireland reported a 9% increase in its herd, while Scottish figures show a 10% increase. There was a smaller rise in England.

Overall herd increases have been achieved by improved productivity in the breeding herd, which is reported to have shrunk by 2%. However, the June survey showed an even larger fall which was not supported by subsequent data so the figures should be treated with some caution. With fewer in-pig gilts and sows reported, some reigning-in of the increase in feeding pigs might be expected in the medium-term. Feed prices have been favourable, but uncertainty in the finished market may now be filtering through to producers. Additionally, the fall in gilts reported to be in pig may be the result of increased sow retention, as cull sow prices are poor.

UK trading slow at the start of 2015

In January 2015, according to data from HMRC, the UK imported 3% less pork than a year before, with lower deliveries from Germany, Ireland and France. This decrease from European partners, despite the growing gap between EU and UK prices due to the weakening of the euro, concurs with the increased domestic supply and consumer preference for UK product. Denmark retained over a quarter share of the market and increased the volume of pork it delivered to the UK in January by 5%. There was also a significant increase in Polish pork imports, perhaps a remnant of redistribution of product previously destined for Russia. The other legacy of an ample supply, particularly within the EU, was 17% lower unit prices. Bacon and sausages were also cheaper on the year and these categories did increase in import volume. A 3% rise in bacon imports was supported by Germany and Ireland, as product from the Netherlands decreased and was replaced by Danish bacon. 11% more sausages were imported, with the same key European trade partners involved. Less processed pork was imported, however, as the result of Irish, Dutch and Danish reductions.

Despite higher domestic supply, UK pork exports in January 2015 were down 7% on the year, even as unit prices dropped by 12%, bringing the value of exports during the month down to £14.5 million. The UK was competing with supplies from across Europe on Asian markets, as a result of the loss of the Russian market; a 42% reduction in shipments to China and 50% to Hong Kong highlights this. Also, as US production recovers from PEDv, UK exports to that market were down 13% on the year. Meanwhile, exports to the rest of the EU were little changed from January 2014, despite the increased gap between pig prices at home and on the continent. Offal exports to China were also reduced by a third, although more was taken by Hong Kong and South Korea, with higher prices supporting the value of the fifth quarter.

UK pig prices

The EU-spec GB SPP in the week ended 21 March averaged 132.64p per kg, a fall of only 0.01p on the week. This could indicate that the bottom of the market price has been reached for now, as this is the second week of minimal decreases. The SPP does, however, remain over 30p down on the DAPP this time last year as a result of almost ten months of continuous decreases. This stabilisation, as also seen on the continent, comes even as UK supply continues to run ahead of last year, according to AHDB/EBLEX estimates. This balanced market suggests that there are some signs of improving domestic demand going into the spring. Carcase weights, as a factor of overall production, continued to fall, reaching 82.5kg a head, the lowest average this year. The probe measurement also fell to 11.1mm in this week, the lowest since May 2014, suggesting that feeding is maintaining condition rather than fat, helping pigs to hit market specifications.

At 136.61p per kg, the EU-spec GB APP for the week ended 14 March was up 0.36p on the week, the largest weekly increase since May last year. This widened the difference between the APP and the SPP for the same time period to almost 4p.

For the week ended 21 March, average prices for both 30kg and 7kg weaner were up 8p a head on the previous week, despite some higher numbers traded as contracts coincided. 7kg weaners averaged £33.12 per head and 30kg weaners moved up to £44.67. While only a small increase, this does reflect the easing in price falls seen in finished pig prices in the last few weeks, but prices remain £8 and £12 down, respectively, on the year, as the timing of any turn around in the finished pig market remains unclear.

February UK kill continues ahead of last year

Latest Defra data suggest that in February, clean pig slaughtering in the UK was 815,800 head, 4% up on February 2014. This provides confirmation of industry reports of continued ample supplies at that time. Northern Ireland again reported the highest increase in kill as growth in its herd becomes evident throughout the supply chain but all parts of the UK recorded year-on-year growth. Sow and boar slaughterings were reportedly 2% back on last February, at 19,100 head. As cull sow prices continue to be poor, increased retention is likely as sow replacement becomes less economically attractive, which could negatively impact the efficiency of production in the coming months.

The figures also show that, although carcase weights were down marginally on January, at 82.3kg, this was over a kilogram heavier than in February 2014. This, alongside higher throughputs, resulted in a 6% year on year increase in pig meat production, to 70,500 tonnes for the month. As slaughterings for the first two months of 2015 are up on those in 2014 by almost 3%, the downwards movement of finished pig prices clearly continues to be, in part, supply driven.

January EU exports down on the year

In January 2015, at just shy of 124,000 tonnes, the EU-28 exported 5% less pork compared to the previous year, which was before the Russian ban was imposed, according to data from Eurostat. Unit values remained relatively stable but the decrease in volume resulted in a fall in overall income from fresh and frozen pork exports to €287 million. Asia continued to dominate the market, despite a 4% decrease in deliveries to China and less to Hong Kong. South Korea took 60% more EU pork as disease continued to hinder its own production. The US, equally, despite beginning to recover from PEDv, also took more EU pork to satisfy consumer demand, while Japan showed more recovery and decreased its need to import. Australia continued to become an increasingly important recipient of EU pork, edging towards 7% of the market, double its share last January.

Offal exports from the EU were also lower in January 2015 than last year, by 6%, reducing the value of this trade to €94.6 million. With a 5% increase, however, China took over half of all EU offal exports as demand also supported a 14% increase in unit price. The Philippines and South Korea also received more, while Hong Kong reported a 42% reduction. This goes some way to dealing with the issues of carcase balance, as the EU consumer shows a preference for prime cuts and the East for offal. Cured and processed exports were down, by 13% and 10% respectively, with the US and Japan taking over a third of the total.

Feed market update

March so far has been a bullish month for UK grain prices and last week was no exception. New crop (Nov-15) futures in London closed at £132.25/t on Tuesday – up £2.60 on the week and a £6.25/t rise over the month so far. Although Paris maize futures have been flat in euro terms, in sterling terms the Nov-15 contract rose around £3/t on the week to Tuesday with the euro gaining some strength. Despite heavy supplies of the old crop, it is the new crop (harvest 2015) which is driving markets for the time being. Further volatility may be around the corner, with quarterly US stocks and prospective planting data out from the USDA next Tuesday.

Oilmeal prices were unchanged or higher in the UK last week. UK rapemeal (34%, ex-mill Erith, March delivery) £186/t as at 20 March, was up £5 on the previous week, while Brazilian soyameal (48%, ex-store Liverpool, March delivery) was unchanged at £349/t. The reversal of recent currency trends in the week, with sterling weakening against the euro but strengthening against the US dollar, drove the direction of UK prices against a relative lack of supportive news in the oilseeds complex. With a seasonal price dip often seen following the confirmation of the South American soyabean harvest, the current relative stability in prices shouldn’t be taken from granted.
To read more about the latest developments in the feed market click here.

Danish focus on live exports expanded in 2014

In 2014, Denmark exported 1.09 million tonnes of fresh and frozen pork but for a lower value than the year before of DKK18.1 billion (€2.4 billion). This volume was up almost 1% on 2013 but remained 1% below 2012 exports. Inter-EU trade dominated the market and expanded by around 2% on the year. This was driven by a similar increase to the primary partner, Germany, which took 347,000 tonnes over the year. Exports to Poland continued to decline year on year, as they are increasingly replaced by movement of live pigs (see below). The UK imported almost 16% more Danish pork, as unit prices dropped 4%. Non-EU trading showed a 3% decrease overall, as the impact of the Russian ban materialised (in 2013 Russia took 7% of exports). However, many other major non-EU countries received more Danish pork. Japan, in particular, imported 12% more to satisfy demand as its own production was hindered by disease. Australia also increased the volume of pork by 64% to become the sixth largest importer of Danish pork. Exports to China were down 4% but shipments of offal did increase on the year.

The Danish industry continues to increase its focus on the export of weaners for cheaper finishing in neighbouring EU countries, as well as some finished pigs for processing elsewhere. Germany continued to be the recipient of the majority of Denmark’s live exports, almost 7 million head in 2014, up 5% on the year. However, Poland remained the main growth market and took a third more weaners on the year. The price of these live exports was down on the year by 7%, reflecting the trend in finished pig prices across the continent and highlighting the subsequent uncertainty in weaner markets.

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