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AHDB Pig Market Weekly

02 April 2015

AHDB BPEX Pig Market Weekly - 2 April 2015AHDB BPEX Pig Market Weekly - 2 April 2015


More tough times ahead for EU market

According to many predictions, 2014 was supposed to be a good year for EU pig producers. With feed prices low, supplies relatively tight and positive prospects for exports, if not for domestic demand, profitability should have been good. The Russian ban changed all that and supplies were a little more plentiful than anticipated, particularly in the second half of the year. As a result, in the autumn and early 2015, producers were losing money rapidly. Latest figures from the EU December pig census show that the total number of pigs was just over 1% up on December 2013, while the EU breeding herd recorded a marginal increase. Given the poor profitability of EU producers in recent months, any expansion may come as a surprise. However, the main price falls only occurred in the autumn and so December would have been too early for the effect to be readily apparent. Sow slaughterings in some countries have reportedly been much higher since the autumn, suggesting the breeding herd may now be starting to contract again.

Based on the December census results, new estimates from the members of the EU Commission’s working group on pig meat forecasts suggest that the increased supply levels will continue into the first half of 2015. Based on the group’s figures and official estimates from other Member States, pig slaughterings in the first two quarters of this year will be up by over 2% year on year. The situation in the second half of the year is more difficult to forecast, as it depends on the extent of any breeding herd reduction, but the working group estimates that EU production will be little changed from the same period last year. The group, therefore, considered that EU pig prices would remain subdued throughout 2015, albeit recovering slightly from the recent lows.

To read more details of the EU census figures and the resulting forecasts, click here.

US pig herd largely recovered from PEDv

Latest figures from USDA’s hogs and pigs inventory show that the country’s pig herd on 1 March was 7% larger than a year earlier, at 65.9 million head. A year before, the PEDv outbreak was close to its peak and had led to high levels of piglet mortality and, hence, a dramatic reduction in pigs being kept for slaughter. The extent of the recovery is emphasised by the fact that the 2015 figure is higher than that for 1 March 2013, before the PEDv outbreak began. This reflects a larger sow herd, with breeding pig numbers up 2% in the year to March, at just under 6 million head. In addition, productivity had improved and the litter size in the latest quarter was the largest on record for the time of year, although still somewhat behind the long-term trend.

The report also confirms that, as expected, producer intentions for future farrowings are somewhat less positive than they were a few months ago. This reflects the sharp fall in US hog prices; recent quotes have been less than half the level recorded last summer and were at their lowest level in more than five years. Despite feed prices remaining low, this means that producer margins are reported to be back in the red, after a bumper year in 2014. As a result, while 2% more sows were farrowed between December and February, with a similar rise expected in the following quarter, intentions for the June to August quarter now suggest a 2% year-on-year fall in farrowings. However, as this is unlikely to have much impact on supplies before the end of the year, prices may remain below recent levels.

UK pig prices

The EU-spec GB SPP in the week ended 28 March averaged 132.57p per kg, a fall of 0.07p on the week. This is the third week in which the price has decreased only marginally, showing a slight stabilisation of the price. However the SPP remains over 30p lower than the DAPP this time last year following price falls seen since June 2014. Supply in the week continued to be higher than the same week last year. As this is the final week of buying before the Easter period, demand has reportedly been better, while pig numbers have been falling seasonally in recent weeks, leading prices to stabilise. The next two weeks are disrupted by the Easter bank holidays and the underlying market situation should become clearer once these have passed. Carcase weights fell again, making them the lowest average seen in 2015, although they remain up compared to the same week in 2014. The probe measurement rose to 11.3mm in this week.

Following the increase seen last week, the EU-spec GB APP for the week ended 21 March fell 0.12p on the week to 136.49p per kg. This reduced the difference between the APP and the SPP for the same time period to 3.85p.

For the week ended 28 March, the average prices for weaners were varied, with 30kg weaners increasing 76p a head on the previous week to £45.43, while 7kg weaners were back 48p a head on the previous week. 30kg weaners increased despite higher numbers being traded, while increased numbers and continued falls in the finished pig price led the 7kg weaner price to fall. Prices of both 30kg and 7kg weaners remain down on the same week last year, by £10 and £8 respectively.

EU pig meat consumption stabilises as production rises

Provisional AHDB/BPEX estimates, based on the balance of EU production and trade, show that supplies of pig meat available for consumption in the EU increased slightly in 2014. Per capita consumption was estimated to be 40kg, marginally higher than in 2013, as production was slightly higher and exports lower, largely due to the Russian ban. This was the first increase in three years, during which time pigs were in relatively short supply. Nevertheless, consumption is still over 3kg per person below its level before the economic slowdown began, as consumer confidence remains low, constraining purchases of meat. With demand still subdued, pork prices and, hence, pig prices inevitably had to fall significantly last year to generate sufficient sales to match the increased supplies available.

Levels of consumption of pig meat vary widely across Europe. UK consumption was broadly stable in 2014 at around 24kg, well below the EU average and among the lowest of all Member States. This is partly because of relatively high consumption of other meats, such as chicken, beef and lamb, in the UK. Across most of the rest of Europe, pig meat is generally the leading source of protein and consumption levels are higher. Among the larger Member States, consumption was highest in Austria, Germany, Poland and Spain. In each of these, there was twice as much pig meat per person available to be eaten as in the UK, at over 50kg per head, and all four recorded increased supplies for consumption in 2014. Italy was the most important country to record reduced supplies, although it should be noted that there is doubt about the accuracy of some of the Italian statistics.

The Future of Hard Discounters – Lessons from France and Germany

Aldi and Lidl continue to increase market share as mainstream supermarkets contract - the question is how far can they go? Operating across a narrow product range, the hard discounters rely on enticing an ever greater proportion of mainstream shoppers into their stores to gain market share. In GB, it is only in the last five years that Aldi and Lidl have been successful in going mainstream – with 54% of shoppers from across the socioeconomic spectrum using these stores at least once a month according to IGD.
While it is impossible to accurately quantify the future growth of hard discounters in GB, there are some indications of what trajectory discounter growth might take from trends in other EU countries. To read more about what experiences in Germany, France and elsewhere could tell us about GB, click here.

Feed market update

May-15 UK feed wheat futures closed at £120.50/t on Tuesday, down £2.10 since the previous week’s close. Chicago May-15 maize and wheat futures followed a similar trend, closing down $4.32 and $6.69/t respectively week on week. The market was weighed down by USDA quarterly stock figures (as at 1 March), which revealed wheat and maize stocks were up 11% and 6% respectively year on year. Maize stocks were the highest for 1 March since 1987, while the change in wheat stocks between 1 December and 1 March is the smallest since 2008/09. This reflects the sluggish pace of US wheat exports so far this season, not helped by the strength of the US dollar.

Chicago May-15 soyabean futures prices closed at $357.57/t on Tuesday (31 March), down $3.12 since the previous Tuesday’s close. UK rapemeal (34%, ex-mill, Erith) was £190/t on Friday (27 March), up £4 since the previous week. According to Strategie Grains, a favourable outlook for European rapeseed yields is not enough to offset a reduction in the estimated planted area and a decline of 10% in EU-28 rapeseed output is forecast in 2015/16, compared with 2014/15. Very early results from the Argentine soyabean harvest, which commenced last week, revealed better yields than expected, which will compensate for damage caused by flooding. Although a useful indication, yields could vary as harvest progresses but as weather prospects look good for the crop, sentiments are currently remaining bearish.

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

More Dutch pork exported in 2014 at lower prices

After a poorer second half of the year, in 2014, the Netherlands exported 742,000 tonnes of fresh and frozen pork. This was 2% more than in 2013 but at a 3% lower value of €1.53 million. There was a shift in the trading partners of the Netherlands, as 1% less pork went to the EU, although it still accounted for nearly 80% of the total. Italy, however, remained the primary recipient, taking 4% more on the year, while Germany and Greece took less. The UK and Poland did increase Dutch imports slightly, at cheaper prices than in 2013. Clearly the loss of the Russian market affected supplies throughout the EU but Dutch pork was successfully redistributed to Asian markets. In particular, nearly twice as much went to Japan, 62% more to South Korea, as well as 54% more to Australia. Montenegro also emerged as a major buyer of Dutch pork, more than tripling its purchases to 16,000 tonnes.

Live exports performed less well in 2014, down 21% on the year to 8.4 million head. Eurostat data suggests slaughterings were up 3% on the year, giving rise to a 5% increase in pig meat production, which begins to explain a reduction in the need to export pigs for slaughter; numbers fell by 23%. With prices remaining reasonably flat, this resulted in a 27% decrease in value for this trade, to €356 million. The export of weaners to Germany for finishing did still account for the largest share of live exports, although it was down by 16% on 2013. Belgium and Poland also imported fewer Dutch weaners but this was partly offset by increased purchases by Spain and several eastern Member States. The value of weaner sales was down 15% to €382 million.

March Pig Market Trends out now

The March edition of Pig Market Trends (PMT) was published on Tuesday. As well as the usual summary of developments in the UK and EU pig markets and the global feed market over the last month, this month’s issue includes more detailed articles on:

• Physical performance. The GB pig herd’s productivity improved again in 2014 but there is a growing divergence between the indoor and outdoor breeding herd performance. Our analysis of the latest data and the differences between indoor and outdoor herds can be found in this article.

• Hard discounters. Aldi and Lidl continue to increase market share as mainstream supermarkets contract - the question is how far can they go? While it is impossible to accurately quantify their future growth in GB, there are some indications from trends in other EU countries. To see what these trends tell us, read this article.

• EU census and forecasts. Latest figures from the EU December pig census and updated forecasts suggest that the tough times for EU producers will continue for much of 2015 but that things could start to improve by the end of the year. You can read about the latest EU pig herd developments and forecasts for the coming year in this article.

• UK December survey. Latest figures from Defra show that in December 2014, the UK pig herd was above 4.5 million head for the first time since 2008, up 3% over the last year. This shows that productivity continues to improve, given that the number of sows was down by 2%. More details of the survey results can be found in this short article.

Pig Market Trends is available free of charge. You can subscribe by e-mailing [email protected] Recent editions can be downloaded from the BPEX website by clicking here.

Quarterly Consumer Category Report out now

The latest edition of AHDB/BPEX’s quarterly Consumer Category Report for pig meat has recently been published. The report has been completely redesigned and now contains even more information about the retail performance of the main pig meat categories in the 12 weeks up to the 1 February. It also covers wider consumer trends and recent developments in the pig market. There is also information about the upcoming pulled pork campaign.
To read the Consumer Category Report, click here.

DOWNLOAD REPORT:- Download this report here

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