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AHDB Pig Market Weekly

16 July 2015

AHDB Pig Market Weekly - 16 July 2015AHDB Pig Market Weekly - 16 July 2015


UK imports less pig meat in May

UK imports of pork and bacon in May were lower than a year earlier for the second month in a row. Pork shipments were down by 12%, at 27,300 tonnes, the lowest figure at this time of year since 2002. With consumer demand relatively low, this suggests that retail buyers were able to source more of the pork they required from the increased supplies of UK pigs, even though imported pork was relatively cheap; at £1.70 per kg, prices were down 15% meaning the value of pork imports were down by a quarter. The three main suppliers, Denmark, Germany and the Netherlands all sent less pork to the UK, although there were increases from Belgium, Spain and Poland.

Bacon imports also fell by 12%, to 18,400 tonnes, with the largest fall being in Danish supplies. Again lower prices meant the fall in value terms was even larger. There were increases in processed imports, with 3% more sausages and 11% more other processed products entering the UK, with growth driven by supplies from Poland.

UK pork exports also declined in May, compared with a year earlier, being down 12% at 12,800 tonnes. Reported problems with imports to Hong Kong meant shipments to that market were sharply lower. They may have also contributed to a drop in exports to Denmark and the Netherlands, likely for re-export. Trade with Ireland and Germany, however, was higher, with the former unusually being the leading market during the month. With unit prices down 9%, the value of exports was 20% lower than in May 2014, at £13.3 million.

Although much lower in volume, exports of processed and cured pig meat continued to perform well in May, while there was also growth in offal shipments. These were up 7% year on year in May, largely due to a strong recovery in volumes sent to other EU countries, particularly the Netherlands. Exports to China/Hong Kong were down slightly, as were those to some other Asian markets.

Retail share of producer price stable for fourth month

The share of the retail price received by producers showed continued stability in June, at 35%. This is the fourth consecutive month that it has been around this level and the second month where it has increased by just 0.1 percentage points. Both the farmgate and the retail prices showed slight increases in the month, with the farmgate price up 1%, while retail prices saw even smaller gains. This leaves the measure 7 points back on the level seen in June 2014 as farmgate prices are well below last year, while retail prices have recorded very marginal increases.

Retail pork prices remained stable overall in the past month, although with different cuts showing differing trends. Boneless shoulders showed the largest increase of 2%, while loin steaks were up 1%. Pork sausage prices fell by 4% and both leg end fillet and minced pork dropped 2%. The prices of pork sausages, fillet end leg, boneless leg and minced pork all remained below levels seen in 2014. However, the price for shoulders was up by 5% compared with a year earlier, while loin steaks and chops were up 2%.

UK pig prices

UK finished pig prices resumed their increase in the week ended 11 July, following the slight fall seen in the previous week. The EU-spec SPP was up by over half a penny on the week at 133.16p/kg as supplies tightened slightly, while good weather of late has encouraged demand. This left the price 29p lower than 2014 levels, with the gap continuing to fall. Supplies were down 2% on the previous week but production last week was higher than normal due to plant closures two weeks ago and slaughterings were up 6% compared to the same week last year. Carcase weights increased very marginally from the level of the previous week, to 80.34kg. However, these weights remain low compared to the rest of the year so far, potentially due to the hot weather limiting growth. This means carcase weights are now only slightly above levels seen last year, which will have the effect of reducing supplies relative to recent weeks. The average probe measurement was stable at 11.1mm.

The APP followed the trend in the SPP in the week ended 4 July, falling by a third of a penny on the week. The EU-spec APP was at 136.96p/kg, leaving it over 27p lower than year earlier levels. The difference between the APP and the SPP fell to 4.3p, the smallest gap since early May.

A mixed picture was seen for the price of weaners in the past week, with 7kg weaners falling almost 30p to £32.49 per head, while 30kg weaners were up by over £1.50 at £45.03. Both prices continue to track well below 2014 levels, with 30kg weaners down by £10, while 7kg weaners were down by over £7.50 per head.

EU meat production growth set to slow down

Meat production in the EU is forecast to increase by 2% this year but growth will slow down next year, according to the EU Commission’s latest short-term outlook. Output is expected to rise across all the major meats in 2015, with pig meat showing the fastest growth of nearly 3%. However, even this marks a slowdown from the near 6% rise in the first half of the year. This is due to the poor profitability of producers in much of the EU over the last year, which is likely to have led to some herd reductions. This is also reflected in forecasts for next year, when output is only expected to rise by 1%. Slowdowns are also forecast for beef and sheep meat but poultry meat production is set to grow at a similar rate to this year.

The weakening of the euro against the dollar has made EU meat more competitive on export markets. Therefore, despite the Russian ban, meat exports are expected to grow this year and next. In the case of pig meat, the EU Commission forecasts increases of 7% for 2015 and 8% for 2016. Despite this, the rise in production means that per capita consumption is likely to increase again this year before stabilising in 2016.

The report also confirms that 2014/15 marked the best ever EU harvest, leading to record exports and a build-up of stocks. Current forecasts suggest another strong production season in 2015/16, although not matching last year. Output of all major cereals and oilseeds is expected to remain above the five-year average. Only a small drawdown of stocks is anticipated, despite another strong export campaign being anticipated.

Physical performance important to producer returns

Differences in physical performance between top and bottom performing pig breeders could be worth over £300 per sow each year. For finishers, the gap might be around £20 per pig. These are among the findings from new analysis looking at how variations in performance between producers affect returns. The analysis also shows that even last year, one of the better recent years for producers, around 15% of producers may have had negative margins.

Feed market update

At Tuesday’s close (14 July) Nov-15 UK feed wheat futures stood at £126.25/t, down £6.50 from the previous Tuesday. Chicago wheat futures also followed the downward trend but maize futures were up on the week. The latest USDA supply and demand estimates, released on Friday, uncovered a mixed picture for grain markets. In line with expectations, the global maize balance was tighter than previous forecasts but there were substantial changes to global wheat opening stocks because of large reductions to estimates of animal feed demand in China. Markets are keeping a close eye on weather impacts on both crop quality and harvest progress. Some concerns emanated from the Black Sea region last week, with the possibility of grain forecasts being cut if hot weather continues into mid-July.

On Friday, UK rapeseed (delivered Nov-15, Erith) was £280/t down 50p week on week, while Brazilian soyameal (48%, ex-Store, Liverpool) was £306/t, up £4 in comparison to the previous week. 2014/15 global soyabean stocks were forecast lower than previously by USDA, primarily due to higher demand in the US. Nonetheless, the numbers still show large stock accumulation, keeping the big picture for oilseed supplies bearish. US soyabean export sales for the 2015/16 marketing year (which begins in September) are lagging behind recent years. The impact of the weather on rapeseed/canola crops in key producers, the EU and Canada, continues to be monitored, with some improvement in Canada but dry conditions remaining in Europe.

Positive outlook for global meat market

The Food and Agriculture Organisation (FAO) has just published its Agricultural Outlook for 2015 to 2024. In real terms, it forecasts that prices for all agricultural products will decrease over the next 10 years as on-trend productivity growth, helped by lower input prices, outpaces slowing demand increases. However, prices are still projected to remain at a higher level than in the years preceding the 2007-08 price spike. The outlook for the meat market remains largely positive, with feed grain prices set to remain low over the next decade, although there will inevitably be year-on-year fluctuations. Nominal meat prices are expected to stay relatively strong, although not reaching the heights of 2014 but they will decline in real terms. In particular, pork prices are projected to remain close to the levels recorded in most recent years, although with some variation.

Global meat production is projected to rise at a slower rate in the next decade than in the previous 10 years, with most of the growth coming from developing countries. As in recent years, expansion will be led by poultry meat, which will account for more than half the overall growth. Similar trends are also projected for consumption. Per capita pork consumption is expected to be stable overall, with population growth in developing countries the main driver of any increase. Growth in the volume of meat traded around the world is expected to slow down. While the most significant increase in import demand will originate in Asia, Africa will be another growing meat importer, albeit from a low base. Although developed countries are still expected to account for around half of all meat exports in 2024, their share will steadily decrease. The implementation of various bilateral trade agreements over the next decade could diversify the meat trade considerably.

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