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AHDB Pork Weekly Export Bulletin

13 August 2015

AHDB Pork Weekly Export Bulletin - 13 August 2015AHDB Pork Weekly Export Bulletin - 13 August 2015

British Pig Executive Weekly Export Bulletin

Small rise in UK imports in June

Following a sharp fall in May, UK pork imports bounced back in June, reaching their highest level of the year at 30,800 tonnes. However, this was only 3% higher than in June 2014. Growth was driven by Danish shipments, which were up by a third, with most of the increase down to higher volumes of chilled legs. Most other major suppliers actually sent less pork to the UK than a year before. Despite the small increase in June, imports for the first half of this year were still lower than a year earlier, as buyers continue to prefer domestic product. With prices well down on last year, the value of imports during the six months was 16% lower at £297.1 million.

Bacon imports were also slightly higher in June, compared with a year before. In this case, however, shipments from Denmark were lower but were offset by increased volumes from the other two major suppliers, the Netherlands and Germany. The latest figures show a very sharp increase in processed imports but this appears to be a data error, so the true position is unclear. However, sausage imports were lower than in June 2014, with less coming from Germany and Ireland.

Pork exports were also higher in June, with sales to China during the month up by three-quarters, although this is compared with an unusually low figure for June 2014. Germany and Ireland also took more UK pork. However, less was shipped to Denmark, the Netherlands and Belgium, although this may simply be a case of more product being shipped directly to onward destinations, rather than via these countries. Despite the rise in volumes, lower unit prices meant that the value of exports was down 1% year on year in June, to £15.8 million, and by 12% for the first half of the year, at £88.8 million.

After a difficult start to the year, offal exports appear to be recovering, with a 24% year-on-year rise in June. Shipments to China reached a record 2,900 tonnes, 80% up on a year earlier. There were also strong sales to several smaller markets in Asia and Africa. These were only partly offset by lower volumes sent to Hong Kong and a small fall in sales to other EU countries.

Small fall in Danish sow herd

The number of breeding sows in Denmark fell slightly in the year to 1 July 2015, according to new figures from Statistics Denmark. The number of in-pig sows and gilts was down by 1%, with an even smaller reduction in lactating sows. This contrasts with small increases recorded in the April census and could mark some downturn in producer confidence in the face of sustained low pig prices. However, a rise of 9% in maiden gilt numbers contradicts this and suggests that the overall situation remains one of broad stability.

The figures also show the continuing effect of increasing weaner exports, which were up another 10% in the first five months of 2015, compared with a year earlier. This means that, while the number of young pigs was higher than in July 2014, there were 3% fewer finishing pigs (over 50kg) than a year before. This continues the long-term trend of decreasing numbers of finished pigs and suggests that Danish slaughterings may fall again this year, despite increased piglet production.

UK pig prices

For the third time in four weeks, the GB SPP eased slightly in week ended 8 August, with the EU-spec price standing at 132.58p/kg. This was its lowest level since mid-June, although the fall during the week was less than half a penny. Although the holiday season may have meant some easing of demand, the market remains balanced, with the price having been no more than a penny and a half from its current level since February. Nevertheless, prices remain over 26p lower than a year before, even though the gap continues to narrow. One of the reasons for low prices is the more plentiful supplies so far this year, although there may be signs of some tightening at present. Slaughterings were estimated to have fallen for a second straight week, to 169,600 head, although this is still higher than at the same point last year. Carcase weights also remain low by recent standards and similar to a year earlier, averaging 80.35kg in the latest week.

In week ended 1 August, the EU-spec APP lost the ground gained in the previous two weeks, falling by a fifth of a penny to 137.15p/kg. This was around 25p lower than a year earlier. As the fall in the APP was slightly smaller than that for the SPP in the same week, the gap between the two prices increased slightly to 4.14p.
The weaner market also remains well balanced, with prices for both 7kg and 30kg animals rising slightly in week ended 8 August. At £33.20 per head, 7kg weaners sold for 33p more than the previous week, on average, but were still more than £7 cheaper than a year before. The rise for 30kg pigs was even smaller but, at a penny under £44 per head, the price was £8 down on the year.

US pork exports begin to recover

In the first six months of 2015, US pork exports were down 5% on the same period last year. Despite the overall fall, volumes in the second quarter were up 6% year on year, having been down as much as 15% in the first quarter. The fall in exports came despite US pork production being up 7% in the first half of 2015 compared with the previous year, when output was affected by the PEDv outbreak. The dollar has remained strong against the euro into the second quarter of 2015 and so the US has continued to face stiff competition from EU exporters in key markets. However, labour disputes on the US West Coast, which had impacted volumes to some key Asian markets in the first quarter of 2015, were resolved. Nevertheless, prices had to fall in order for US pork to compete. As a result, the total value of US pork exports in January to June 2015 was down 18% on the year at $2.09bn, with the unit price down 14%.

Shipments to Mexico, the largest market, were up 10% on the year, increasing its share of US pork exports to over a third. Volumes to South Korea were up by near half as Korean import demand remains strong on the back of depressed domestic production. However, shipments to Japan, Canada and China were all down on the year. The US continues to lose market share in China, with only a small number of plants approved for export. Shipments to some smaller markets increased on the year, with volumes to several Latin American markets, such as the Dominican Republic and Honduras, rising. In the second quarter of 2015 there was some recovery in exports to Australia and China and further growth in shipments to a range of smaller markets.

EU production remains strong in May

In May, EU pig slaughterings dipped below year earlier levels for the first time since November. However, with one fewer working days in the month, the marginal fall still meant that average daily throughputs were 4% higher than in 2014. The total of 19.9 million head was only 65,000 lower than a year before, despite the shorter month. Slaughterings for the year to date reached 105.7 million head, 3% more than in the first five months of 2014. With carcase weights again higher, pig meat production was up 1% year on year in May, at 1.79 million tonnes. Output for January to May reached 9.6 million tonnes, 4% up on the same period last year.

Many of the major producers recorded increased throughputs in May. Most notably, Spain killed 5% more pigs than in May 2014, with other big increases recorded in Netherlands, up 9%, and Poland, up 7%. German slaughterings were up by less than 1%. These increases were offset by falls in, among others, France (down 6%), Belgium (-5%) and Denmark (-23%). Figures from the latter have shown extreme variations this year, with the May fall following a 27% increase in April. The reasons for this are not clear and the figures could still be subject to revision. All of the EU’s major producing countries showed increased output for the year to date, with substantial rises in some. This goes a long way to explaining why pig prices have remained subdued throughout the year so far.

Feed market update

UK Nov-15 feed wheat futures closed at £119.25/t on Tuesday, up £1.01 on the week. Chicago (Dec-15) futures prices also increased marginally and maize futures prices followed a similar trend. The European wheat harvest has continued to make progress over the past week with rapid advancements in Germany and France. In the UK, 29 July - 4 August was largely dry and 50% of the winter barley area has now been harvested. The wheat harvest has just begun and was 1% complete as at 4 August. Dry weather in Russia has lifted hopes for the size of the wheat crop, further increasing competition in export markets, where the UK was already struggling to compete. For maize, the outlook has not been so positive in the EU, as crop conditions in France continued to decline, as hot weather stressed crop growth.

As at Friday, Brazilian soyameal (48%, ex-Store, Liverpool) was £288/t, down £8 week on week. US soyabean prospects have remained in focus this week, with the key yield forming period well underway. Weather forecasts varied regionally but generally were taken as slightly supportive to prices. As at 4 August, according to the latest ADAS Harvest Report – the harvest of winter oilseed rape was 35% complete in the UK. Harvest progress is in line with the five-year average and ahead of last year. The majority of crops look clean, with low levels of lodging and pod shatter. Some crops have been slow to ripen.

More wheat and soya used in animal feed

According to the latest figures from Defra, compound pig feed production for the second quarter of 2015 was 1% higher than a year earlier at 449,000 tonnes. There was a minimal increase in production of breeding and finishing pig feed but 6% more grower feed was produced. These figures suggest that the size of the UK herd remains broadly stable but there may have been further improvements in productivity. The figures also show that the price of compound pig feed remained relatively low, with the average of £234 per tonne only marginally lower than the previous quarter but matching the average of the final 3 months of last year, which was the lowest since 2010. Overall compound animal feed production was also up 1%.

Wheat is still being used more in all compound animal feed production this year compared to last. The use of wheat in compound feed is still on the up, with a 13% increase compared to the second quarter of 2014, contrasting with a decrease in the use of barley, oats and maize. The price of feed wheat is relatively lower than barley this year, which has contributed to the increased use of wheat. Also the higher price of imported French maize is making it a less attractive option as a feed ingredient. Soya cake and meal has seen an increase of use in animal feed of 3% in the second quarter of this year compared to a year earlier. This would be indicative of the more appealing price of soyabeans due to record production in 2014/15 and another expected high production year for 2015/16.

More on how the exchange rate affects the GB pig market

In a previous article we began to examine the impact of the pound–euro exchange rate on the GB pig market. That article focused primarily on import prices, which have a close relationship with GB prices.
However, this is not the only way in which exchange rates affect the UK market. In a second article, we look at two other elements, exports and input costs. The analysis suggests that there is little relationship between exchange rates and exports. However, input prices are influenced by the pound-dollar exchange rate. The strengthening over the dollar over the last year may have added up to 10p/kg to pig production costs as a result.

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