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AHDB Pig Market Weekly

16 April 2015

AHDB BPEX Pig Market Weekly - 16 April 2015AHDB BPEX Pig Market Weekly - 16 April 2015


UK trade increases in February

In February 2015, according to data from HMRC, the UK imported 7% more pork than the year before, with increased shipments from Denmark, the Netherlands and Belgium, although imports from Germany were lower. This could be the first sign that imports may finally be starting to rise due to the large difference between UK and EU prices and is the biggest year-on-year increase since last April. Denmark remained the largest supplier of pork to the UK, with approximately 25% of the total, while imports from Poland were significantly higher than in February 2014. The unit price of imports was down 16% on the year as a result of ample supplies across the continent, making the total value of imports 11% lower year on year. Bacon imports remained stable compared with the previous year as increased volumes from Denmark, Germany and Ireland offset a fall in shipments from the Netherlands. Imports of processed pork were 13% higher as a result of a surge of imports from Poland, while sausage volumes rose 8%, with gains seen from Germany, the Netherlands, Ireland and Poland.

High levels of domestic production led UK pork exports to increase 10%, despite the strength of the pound against the euro. Much of this was due to a rise in shipments to China, which were up by a quarter as the Chinese took advantage of high supplies and low prices of pork from the EU. Exports to the EU were mixed, with sales to Germany, the largest importer of UK pork, falling, while exports to Ireland, the Netherlands and Denmark, presumably largely for re-export, all increased despite the gap between prices in the UK and the EU remaining large. However, a fall in unit prices led the value of UK exports to decline by 8% to £14.7 million. Offal exports to China were also up sharply, with export to Hong Kong also increasing. However, a slight decline in the unit value softened the value of fifth quarter exports.

Producer share of retail price falls again

During March, both farmgate pig prices and retail pork prices fell. However, the former dropped more quickly than the latter, meaning that the share of the retail price received by producers fell slightly to 35%. While only slightly lower than the figure for February, this is nearly six percentage points down on a year earlier, as pig prices have fallen 16% while retail prices were only 2% down. The modest fall in retail prices during March did mean that they were at their lowest level in nearly two years.

The overall fall in retail prices in March was due to lower quotes for boneless leg (down 1%), loin steak (1%), traditional pork sausages (2%) and minced pork (7%). These were partly offset by higher prices for pork fillet (up 2%) and boneless shoulder (up 1%). Compared with a year earlier, loin chops were the only monitored cut which was more expensive, although prices for chops were up as much as 17% compared with March 2014. All other cuts were cheaper, with particularly sharp falls for sausages and boneless leg, down by 13% and 12% respectively.

UK pig prices

Following the relative stability seen in recent weeks the finished pig market returned to declines in the week ended 11 April, with the EU-spec GB SPP falling to 132.19p/kg. This drop pushed the SPP to nearly 31p lower than the level seen last year and follows four weeks of prices only seeing marginal falls. This latest fall came as there was a lower estimated level of slaughterings due to the shorter week following the Easter bank holiday. Estimated slaughtering increased 2% compared to the previous week, which was also affected by Easter closures, at 161,300 head and was 4% higher than the week following Easter in 2014, which was later in the month than this year. Carcase weights rebounded from last week’s lower levels, reaching 82.41kg, over a kilo heavier than the levels seen at the same time last year. Despite increased slaughter weights, the average probe measurement remained stable at 11.2mm, showing the pigs put the weight on as lean meat rather than fat.

The EU-spec GB APP started falling again in the week ended 4 April. It was down by over two thirds of a penny at 136.10p/kg. This reduced the difference between the APP and SPP back down to 3.68p/kg. However, the gap remains larger than this time last year when the prices were first introduced.

The return seen to falling deadweight pig prices has also been seen in weaner prices. Average prices for both 7kg and 30kg weaners fell in the week ended 11 April, to £33.29 and £44.03 per head respectively. This has further increased the difference in price being paid for weaners between now and the same period last year, with prices being down around £7 and £12 respectively.

EU share of Philippines market up in 2014

In recent years, the Philippines has emerged as an increasingly important export market for pork and pig offal, with volumes more than doubling since 2009. Import volumes of fresh and frozen pork into the Philippines actually fell 1% in 2014 to 71,400 tonnes but remained 24% above the level seen in 2012. However, the value of imports rose 13% to 5.1 billion Philippine Pesos (£69 million). Despite the overall fall in volume, there was a large increase in imports from the EU, which were 56% higher than the previous year. Most of this increase came from Germany, which became the largest supplier of pork to the Philippines, with shipments reaching 20,900 tonnes, more than double the amount in 2013. Philippine imports from Spain and France also saw significant gains.

Increased imports to the Philippines from the EU came at the expense of the US and Canada. High prices caused by the outbreak of PEDv in the US meant that the lower prices in the EU due to the ongoing Russian trade restrictions led to EU pork being more competitive on the global market. Imports from the US fell to 9,000 tonnes, down by more than half, while imports from Canada, previously the largest supplier of pork to the Philippines fell at a similar rate, to 10,200 tonnes.

While imports of fresh and frozen pork to the Philippines recorded marginal falls, imports of pig offal increased to 139,300 tonnes, up over 60%. The EU again saw large growth in its exports to the Philippines, with volumes more than doubling, to reach 96,100 tonnes, with many Member States, including the UK, benefitting. Unlike pork, volumes from the US were up slightly, while those from Canada only fell by 20%. The value of the offal trade exceeded that for pork, nearly doubling to PRP 7.7 billion (£105 million).

Global meat prices follow other food prices down

The latest food price index from the UN Food & Agriculture Organisation (FAO), covering March, fell for the fifth consecutive month, following the downward trend seen since April 2014. The overall monthly food price index was down over 1% from the previous month and almost 19% (40 points) from its level a year ago. Prices have been falling as a result of large global supplies of most commodities used in the index. In particular, cereals prices have fallen at a similar rate as high availability of export supplies weighed on international prices.

The FAO Meat Price Index averaged 177 points in March, down 1% from its February value and 17% below the peak level in August 2014. The fall was caused principally by lower pig meat and poultry quotations but prices for ovine meat also fell. Bovine meat quotations were largely unchanged, with global supplies remaining tight. Since reaching an historic peak last July, the Index has fallen each month. Reduced import demand in Asia, where several countries recorded large production gains, and in the Russian Federation, which continues to impose restrictions on imports, have been important factors underlying the drop in prices.

Feed market update

UK new crop feed wheat futures (Nov-15) closed at £128.25/t on Tuesday, down £2.75 since the previous Tuesday’s close. Chicago wheat and maize futures (Dec-15) followed a similar trend, with both down on the previous week’s close. The April update of the USDA World Agriculture Supply and Demand Estimates was fairly neutral in terms of altering market direction. The key headline related to an upward revision to global maize stocks driven by weaker demand and higher production. Closer to home, EU wheat ending stocks were lowered again as a result of the weak euro and rapid export pace.

UK rapemeal prices (34%, ex-mill, Erith) were £181/t on Friday, down £3 week on week; soyameal (Hi pro, ex store, east Coast) was £311/t, down £8 since the previous Friday. Confidence is growing for South American soyabean supplies as harvest advances and yield reports continue to be positive, with further upgrades to production estimates. There were relatively few changes in the updated USDA estimates for global soyabean supply and demand and the picture remains one of heavy global supplies. Although the forecast of US ending stocks was reduced slightly due to higher crush demand, monthly US crush statistics out later this week will give greater insight into whether the trend is continuing.

Chilean exports grow in second half of 2014

Chilean pork exports in 2014 increased 1% compared with 2013, with much of the increase coming in the second half of the year. Shipments in the first half of the year were down 12%, with exports to most major markets, with the exception of China, falling. However, in the second half of the year volumes increased 16%, with 55% of total shipments coming in the second half of the year. Much of this increase was driven by higher volumes being shipped to Russia as a result of the restrictions placed by Russia on products from the EU, US and Canada. In 2014, Chile exported 24,900 tonnes to Russia, up 44% year-on-year, with 75% coming in the second half of the year. Despite increased competition from Russia, exports to South Korea, China and Peru all increased, by 9%, 21% and 11% respectively, while shipments to Japan (the largest export market in 2014), Columbia and the EU fell.

As demand for Chilean products increased in 2014, so did the average unit value, with the average price for shipments increasing 6% in US dollar terms. Much of this was driven by a 50% increase in the value of products destined for Russia. As both the volume of exports and their average value increased in 2014, the total value of shipments of pork from Chile reached $450 million, up 8% compared to the previous year, with 58% of this coming in the second half of the year.

Data for the first two months of 2015 shows Chilean exports have continued to increase, being up 29% year on year at 20,700 tonnes, although unit prices have dropped back. Shipments to South Korea, China and Russia have all continued to increase, while volumes going to Japan have fallen, making South Korea the largest destination for Chilean pork during the period.

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