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AHDB Pig Market Weekly

23 April 2015

AHDB BPEX Pig Market Weekly - 23 April 2015AHDB BPEX Pig Market Weekly - 23 April 2015


UK production growth continues in March

Latest figures from Defra show that the growth in UK pig meat production continued in March. Total output during the month was 69,300 tonnes, 5% higher than in the same month last year. This is the highest March figure since 2000 and marks the seventh straight month during which pig meat production has risen by 3% or more year on year. This growth is one of the key reasons why UK pig prices have been under pressure during this period as consumer demand has been subdued. Despite these price falls putting many producers back in the red, there is still no sign that this is leading to an increase in sow slaughterings. Indeed, the number of adult pigs killed was 1% lower than in March 2014, at 19,500 head.

The rise in production was driven by a 4% annual increase in clean pig slaughterings during March, to 810,000 head. This continues the trend of most recent months, as further productivity gains mean there are more pigs available. All parts of the UK recorded increased throughputs during the month, although the rate of growth was slightly slower in Scotland (up 1%) and Northern Ireland (up 2%) than in England & Wales. Despite being slightly lower than the previous two months, carcase weights still averaged nearly a kilo heavier than a year before, at 81.8kg. This also contributed to the higher meat production.

USDA revises 2015 forecasts downwards

The latest global outlook report from the US Department of Agriculture has revised previous forecasts for global pig meat production in 2015 downwards to 110.9m tonnes. This fall comes despite upwards revisions for volumes from both the EU and the US, as the forecasts for China, Brazil and Russia have all been moved to lower levels. This means total production in 2015 is forecast to grow at a slower rate than previously projected, up less than 1% compared with the levels seen in 2014. China is expected to continue to dominate global pig meat production but its production is now forecast to fall in 2015, down marginally compared to the level seen in 2014, the first fall in Chinese output since 2011. Production in the US in 2015 is forecast to be higher than previously thought following the PEDv-affected year experienced in 2014, with production up by over 6% to an anticipated record level. Pig meat production in the EU is expected to continue to experience modest growth.

Forecasts for pig meat exports have also been revised downwards, by 5% to 6.8m tonnes, which would make 2015 the third consecutive year in which exports have fallen. This fall is mainly driven by downward revisions to forecast exports from the US, Brazil and China as the continuing Russian economic problems and trade restrictions lead to an excess of pig meat on the global market. There is also expected to be increased competition for markets, with more supplies being exported from the EU, whose exports were revised upwards, to 2.25m tonnes. This would make the EU the world’s largest exporter, overtaking the US for the first time since 2004.

UK pig prices

Following falls in the price of the finished pigs throughout 2015, in the week ending 18 April the EU-spec GP SPP increased by 0.14p to 132.33p/kg. Despite this increase, the difference compared to the same week in 2014 remains at almost 31p. Prices have risen despite estimated slaughterings being 170,900 head, up 7% on the previous year and 6% on the previous week. However, both of these comparison weeks were affected by Easter closures, so supplies would have been expected to have been higher. Carcase weights were broadly level with the previous week at 82.4kg and were up by over 1.5kg compared to the same week in 2014 as ongoing low feed costs encourage producers to finish pigs at higher weights. The average probe measurement continued to decline, falling to 11.1mm showing that, despite the increased weights, producers are still managing to get their pigs in specification.

The EU-spec GB APP continued to fall in the week ended 11 April, dropping by just over a third of a penny to 135.75p/kg. This is 29p lower than the same week in 2014. This has further reduced the difference between the APP and the SPP to 3.56p/kg.

Despite some recovery in the finished pig price, weaner prices continued to drop in the week ended 18 April, with average prices for 7kg and 30kg weaners falling to £33.13 and £43.34 per head respectively. The difference in prices being paid for weaners between now and the same period last year increased to over £14 per head for 30kg weaners but fell to less than £7 per head for 7kg weaners.

EU trade increases in February

In February, the EU exported 128,000 tonnes of pig meat, 29% higher than February 2014, the month immediately after the Russian ban on EU imports was imposed. This figure was also up on February 2013, showing EU volumes are back above levels seen before the Russian export ban. Shipments from the EU to China grew by half on levels seen a year ago, reaching 29,700 tonnes, while volumes going to South Korea and the United States rose at a similar rate and those to Australia more than doubled. However, the amount exported to Japan fell 12% to 21,800 tonnes, as the Japanese industry continues to recover from PEDv. The average unit value of shipments was up 1% compared to the year earlier in euro terms (but was 16% lower in US dollar terms), which led to the total value of exports from the EU increasing to €294 million, up 30% on February 2014. The increase in February more than offset January’s decline in shipments, so the total volume of pig meat exported from the EU in the first two months of the year was up 10% year on year.

EU offal exports also increased in February, up 14% at 88,200 tonnes. China again took over half of the offal shipped from the EU but exports to Hong Kong fell, while volumes to the Philippines and Korea continue to rise. Unit prices of offal exported also increased in euro terms in February, up 2%, leading the total value of shipments to grow 17% to €99 million. Cured and processed exports were down, by 7% and 17% respectively, with the US and Japan remaining the major markets for these products.

EU Private Storage Aid having limited impact

The current Private Storage Aid (PSA) scheme for EU pig meat came into force on 9 March. So far, the scheme appears to have had little impact on the EU pig market. This contrasts with some previous PSA schemes, although these were implemented in somewhat different market conditions.

Feed market update

With the May contract on UK feed wheat futures coming to a close, attention is squarely on the November 2015 contract for market direction. UK Nov-15 feed wheat futures closed at a six and a half month low on Tuesday at £124.35/t, down £3.90 from the previous Tuesday’s close. Markets have been on ‘weather watch’ recently with all eyes on how spring weather could potentially be impacting on the size of crops for harvest in 2015. After a period of dryness, welcome showers and storms hit some key US hard red winter wheat growing regions last week. Elsewhere, good weather and sowing conditions have increased German forecasts for the size of its wheat harvest. In contrast, current estimates of the size of Ukraine's barley crop could be revised down after insufficient sowing progress recently. However, this might point to more land being available for the later-sown maize crop.

UK rapemeal prices (34%, ex-mill, Erith) rose £6 on the week to £187/t on Friday, while soyameal (Hi pro, ex store, east Coast) fell £5 to £306/t. This has left soyameal at its cheapest level in over 3 years. There have been various reports of good oilseed demand levels from across the globe in the past week. US soyabean monthly crush data for March was the fourth highest on record. Export demand for old crop US soyabeans also showed some recovery according to the latest USDA export sales data, after two weeks of lacklustre progress. The South American soyabean harvest continues, with the Rosario Grains Exchange revising its estimate for 2014/15 Argentine soyabean production 1Mt higher to 59Mt.

Brazilian exports start 2015 lower

In the first three months of 2015, Brazil exported 18% less pork than in the same period last year. This came despite it being one of the few major pork exporters which still had access to the Russian market. While this led to strong growth in shipments and much higher prices in the second half of 2014, by the turn of the year the situation had changed. The economic problems in Russia, driven by the depreciating rouble and low oil prices, meant that its willingness to pay inflated prices diminished. As a result, Brazil actually sent slightly less pork to Russia than in January-March 2014, while the price of these shipments was little changed in real terms (although still 50% higher in rouble terms). Nevertheless, Russia remained the leading market for Brazilian pork during the three month period.

Brazil’s export troubles weren’t confined to Russia, with shipments to the rest of the world down by 27% year on year. Most other major markets took less Brazilian pork, some much less, partly due to increased competition from the EU, whose exports were, unusually, similarly priced to those from Brazil. Despite this, with prices 12% higher in real terms, the value of exports only declined by 8%, to R$570 million.

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