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AHDB Pig Market Weekly

21 May 2015

AHDB BPEX Pig Market Weekly - 21 May 2015AHDB BPEX Pig Market Weekly - 21 May 2015


EU exports surge in March

Pork exports from the EU during March were up 19% on a year earlier, at 139,000 tonnes. While shipments in March 2014 were down in the wake of the Russian ban, the latest figure is also higher than the same month in earlier years. Indeed, it is the highest March figure in records back to 2002. As in most recent months, strong sales to Asia and Oceania have driven the increase, with China, South Korea and Australia among the major growth markets. The weak euro has ensured that EU pork remains competitive on these markets as demand strengthens. This means that, although prices were 19% lower in US dollar terms (the dollar being the currency of international trade), they were actually 4% up in euros. That meant that the value of exports rose by nearly a quarter year on year, to €319 million.

Offal exports were equally strong in March, with a 29% year-on-year rise, to 106,800 tonnes. China and Korea were again key growth markets, with shipments to the latter more than doubling. There were also good sales to a range of smaller markets in Asia and Africa. Again, unit values were higher in euro terms, increasing the value of exports by 37% to €123 million. Even pig fat, for which Russia was previously the dominant buyer, recorded increased shipments in March, although they will still only around half their level in March 2013. However, unit prices fell further and were only around half of their level before the Russian ban.

Producer share of retail price continues to fall

During April, the farmgate pig price and retail pork prices diverged, with farmgate prices falling while retail prices increased. This led to the share of the retail price being received by farmers falling marginally to just below 35%. This was only a small fall on the month but the producer share was over five points lower than in April 2014 as pig prices have fallen 17%, while retail prices have only dropped by 2%. This makes the share of the retail price being received by the farmer its lowest level in at least six years.

The rise in retail prices during April was due to higher prices for minced pork (up 8%), traditional pork sausages (2%), diced pork (1%) and boneless leg (1%). The only monitored cut to record falling prices was pork shoulder, down 1%, with all other cuts remaining stable. Compared to a year earlier, pork mince and loin chops were the only monitored cuts to increase in price, up 1% and 2 % respectively. All other cuts were cheaper, with boneless leg (down 10%), diced pork and loin steaks (7%) showing the largest falls.

UK pig prices

The GB pig market remained well balanced in week ended 16 May, with the EU-spec SPP virtually unchanged at 131.44p/kg. While this is over 32p lower than a year earlier, the price has lost less than 2p since the end of February. However, it is worth remembering that this is a time of year when prices would normally be rising as supplies tighten seasonally. While there has been some reduction in slaughterings this year, numbers remain higher than a year ago. At around 164,000 head, estimated throughputs for the last two full weeks were the lowest of the year outside Bank Holiday weeks. However, they were still higher than estimates for the same weeks last year. Similarly, while carcase weights have fallen, they remain well above last year’s levels; at 81.65kg, the latest week’s figure was the lowest since Christmas but was nearly a kilo heavier than a year earlier. With the gap between UK and EU prices remaining large, demand will need to improve if prices are to receive a boost.

After a rise in the previous week, the EU-spec GB APP fell back again in week ended 9 May, losing 0.8p to stand at 135.72p/kg. This was around 30p lower than a year before. The gap between the APP and SPP narrowed somewhat during the week, to 4.32p.

The broad stability in the finished pig market is also being reflected in the weaner market. In week ended 16 May, the average price for 7kg weaners fell a fraction, while 30kg weaners were slightly more expensive. However, in both cases the prices were little changed from their level at the end of February, despite some fluctuations in between. At £33.04 per head, the 7kg price was around £8 down on a year earlier, while the 30kg price was down over £11 on the year at £44.60 per head.

EU production remains high in February

Latest figures from Eurostat show that EU pig slaughterings in February 2015 totalled 20.3 million head. This was 3% up on the same month last year, continuing the rising trend of most recent months. With carcase weights averaging only slightly heavier, pig meat production was up by a little over 3% at 1.84 million tonnes. Although up on a year earlier, the number of pigs slaughtered per working day was somewhat lower than in January, as is normal for the time of year. Even so, with supplies still relatively plentiful, it seems that the rise in pig prices during February was mainly demand driven.

The most important contributor to the rise in EU slaughterings was Spain; its throughputs were 8% up on February 2014 at 3.9 million head. This was more than enough to offset a marginal fall in the German kill, the EU’s largest, largely due to lower imports of slaughter pigs from the Netherlands. This also meant that Dutch throughputs were up sharply compared with a year earlier. Among other major producers, slaughterings in Denmark were up 1%, while in France they were level on the year and in Poland were down 2%.

The state of the UK poultry industry

One of the big challenges faced by red meat producers is the continuing reliance of UK consumers on poultry meat, in particular chicken. So how did the UK poultry industry fair in 2014? Many of the answers can be found in the Pig and Poultry Pocketbook, released by AHDB this month. This shows production falling for the first time in five years, while imports rose faster than exports.

Feed market update

UK feed wheat futures found some upward momentum in the past week, with the Nov-15 contract firming £3 on the week to £122.25/t as at Tuesday’s (19 May) close. This disguises larger movements in the week, with the contract reaching £124/t at Monday’s close, from £117.55 on 13 May. The catalyst for these gains was the progression of heavy rain across the US Plains, indicating ‘El-Niño like’ conditions. The confirmation of an El-Niño event raises fears over Australian cereal production for 2015/16. While these fears are likely to drive gains in the wheat market, the main threat is in the barley market, given Australia’s importance for global production and the already tight forecast for global barley supplies. The EU is likely to face some renewed export competition from Russia in the final weeks of the season after the country lifted its wheat export duty with immediate effect.

UK rapemeal prices (34%, ex-mill Erith, spot delivery) were £190/t on Friday, down £3 week on the week. Soyameal (Brazilian, 48%, ex-store Liverpool, spot delivery) was £304/t, down £12. This reflected falls in Chicago soyabean and Paris rapeseed futures (in sterling terms) into Friday, which have since gained some strength again. El-Niño is certainly a watch point for the oilseeds market but poses more threat to the vegetable oil market rather than for protein meal supplies. Nonetheless, it is certainly a risk factor to keep an eye on.

EU sow market stabilises

Having been on a downward trend since the summer of 2013, EU sow prices have shown some signs of stabilising since the start of this year. This follows some strengthening of the finished pig market, although sow prices have not improved to the same extent. In the key German market, the M1 sow price started the year at €1.05 per kg, before losing four cents during January. It recovered during February to reach €1.09 per kg and was then broadly stable during March and April. However, in the latest two weeks the price has fallen again, to reach €1.03 per kg in week ended 10 May, following some weakening of the finished pig market.

Prices in Denmark and the Netherlands have shown similar trends, albeit at lower levels, with the latest prices being 70¢ and 79¢ per kg respectively. French prices recovered more strongly in February, meaning that at 88¢ per kg in the latest week they were 10 cents up on the start of the year. No GB sow prices are currently being published by AHDB. However, the domestic price is normally driven by those in Germany, albeit at a discount, which has grown in recent years. Therefore, it is worth noting that, despite being stable in euro terms, the German price has fallen from 82p to 76p/kg in sterling terms. Reports suggest that GB prices have also fallen and are currently at their lowest level for over 7 years.

Lower French exports in Q1 while imports grow

In the first quarter of the year, French pork exports totalled 109,600 tonnes, 7% down on the level seen in 2014. Exports to all major markets fell. Italy remained the largest market for French pork exports, accounting for a quarter of the total. Shipments going there fell 10% in the first three months of the year, while volumes going to the UK and Spain also fell, by 6% and 19% respectively. Higher exports to smaller markets such as Belgium, Bulgaria, the Philippines and Austria, helped to offset some of the falls to the major markets. The Russian ban continues to affect trade, with 4,600 tonnes exported in the first quarter of 2013 falling to 1,500 in 2014 to nothing in 2015. Nevertheless, shipments to non-EU markets were only slightly lower overall. Lower unit prices as a result of high volumes of pork on the European market led to the total value of French exports in the first three months of the year falling to €190.8 million, 12% lower than 2014.

French pork imports in the first quarter of 2015 increased by 1% year on year, to 93,200 tonnes. Spain remained the largest supplier of pork to France, increasing its share of imports to 72%, as shipments increased 3% on a year earlier. This was partially offset by a fall in volumes imported from Germany, the other major supplier, with shipments down 4% year on year. Lower average unit prices led the total value of imports to France in the first three months of the year to fall 7% to €213.6 million.

Falling Chinese herd presents export opportunities

With around half the world’s pigs, developments in China have a big impact on global trends. While much of the world was experiencing high pig prices and low input costs during 2014, the reverse was true in China. This led to a sharp fall in the breeding herd and is projected to mean lower production this year. While slower economic growth may limit demand to some extent, there will inevitably be greater export opportunities as a result.

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