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AHDB Pig Market Weekly

10 September 2015

AHDB Pig Market Weekly - 10 September 2015AHDB Pig Market Weekly - 10 September 2015


Global pork prices begin to rise but remain very weak

Global pork prices reached a low in April before increasing in May and remaining stable in June, however prices remain well below levels seen in 2013 and 2014. The global market has been at its weakest for some years.

Following the high levels seen last year global pork prices fell to $2.51 per kg in April, 24% lower than in the same month last year. Since then there has been a modest price increase in May and in June it averaged $2.64 per kg still one quarter less than a year earlier. Such is the homogeneity of the global market that developments for all major exporters have been similar.

This analysis is based on export prices for the four main global exporters (the EU, US, Canada and Brazil). Prices began falling in mid-2014 and continued to decline until they reached the lowest level for at least five years in April. This fall comes as the total volume of pork shipped from these four countries has fallen by 1% in the first six months of the year.

The weaker prices in 2015 partly reflect the fact that global production has increased as countries such as the United Sates recover from disease outbreaks, especially PEDv, that limited production in 2014. This recovery has led to higher volumes available for export but this has coincided with reduced demand from some of the world’s largest importers. For example the Russian trade ban has affected the EU and Canada in particular.

The recent recovery in price is due to an increase in import global import demand in the second quarter of the year. This led shipments from the major exporters to increase following three previous quarters of declining volumes. This development has been especially apparent in shipments from the US and Brazil.

No change in GB breeder productivity

The GB breeding herd performance overall stayed the same in the year to June 2015 compared to the year ended June 2014, according to the latest performance data from Agrosoft. The average number of pigs weaned per sow per year stayed unchanged at 23.6 in the year ended June 2015. This was even though the average pre weaning mortality reduced from 13.0% to 12.5% year on year. While indoor producers weaned an average of 25.7 pigs, a 0.09 increase on the year previous, outdoor producers weaned an average of 21.48, a 0.12 decrease. The average number of litters per sow per year for outdoor producers decreased from 2.30 to 2.24 over the last year. Indoor breeders also recorded a marginal decrease year on year, from 2.30 to 2.29.

Despite the overall productivity recording little change, the latest data release shows the gap between the indoor and outdoor herds are in keeping with previous developments. With the general performance for indoor breeders rising at a faster pace than for outdoor breeders the gap between them is still increasing.

The performance of the feeding herd improved in the year to June 2015 compared with the previous year according to the data. The feed conversion ratio (FCR) for the rearing herd was slightly better at 1.71, a 1% decrease on the same time last year. However, a greater improvement was recorded for the finishing herd, where the FCR decreased from 2.66 to 2.58. Daily weight gains for the rearing herd were lower than a year earlier, by 6% to 480g/day, from 511g/day. On the other hand the finishing herd recorded a slight rise of 5g bringing the daily live weight gain to 799g.

More detailed figures for these and other physical performance indicators can be accessed through the BPEX website.

UK pig prices

The August bank holiday week experienced disappointing demand even though slaughterings edged back. In the ended 5 September the EU – spec SPP fell by just under one pence to 131.45p/kg week. This represents a return to the levels of late May. The current quote is still over 25p down on the same week in 2014 and the gap has widened as the price fall was lower last year. Estimated slaughterings for week ended 5 September were 1% down on a week previously to 171,900 although they recorded a 2% increase compared to the same week last year. This was even though last year was not a short week. The SPP average carcase weight for week ended 5 September increased for the second week running but was 370g less than the same week a year ago. The average probe measurement increased slightly to 11.1mm.

The EU-spec APP in the week ended 29 August increased for the first time since the last week in July to 136.82p/kg, 0.21p more than the week before. However compared to the same week in 2014 the average price is 14% or 23p less. The gap between the SPP for the same week and the APP remained at 4.4p.
Sow prices have started to move up on the continent which is contributing to price rises in the UK. This includes the key market of Germany where there has been a significant price increase this week, for the first time since February. The grade MI price was up 6 cents per kg.

Please note that due to the receipt of revised data the GB 30kg weaner price for week ended 29 August has been amended from £41.21 to £44.09 per head.

In week ended 5 September, the 30kg weaner price fell by 44p to £43.65 per head compared to a week earlier while throughputs were lower. The price was 17% less than the same week in 2014. In contrast the GB 7kg weaner price recorded an increase for the first time since week ended 8 August to £33.25 per head, £1.12 more than a week prior even though throughputs were higher. This is the highest price since the first week of June. However the price was still £5.21 less than the same week in 2014.

More EU pigs so far in 2015

The number of pigs slaughtered across the EU in the first half of this year was up nearly 5 million head (4%) on a year before, based on latest figures from Eurostat. Rising production was expected following the increase in the EU breeding herd in 2014 but the growth reported is higher than in most forecasts. All the major producers recorded increased throughputs, with growth led by Spain, where 8% more pigs were slaughtered. There was a similar rate of increase in the Netherlands, partly due to lower exports of slaughter pigs to Germany. Even so, German throughputs were up 2%, while France and Denmark killed 1% more pigs. With carcase weights also slightly heavier, total pig meat production during the six months was up 5% at 11.4 million tonnes.

Growth continued in June, with slaughterings across the EU up 7% on the same month last year, at 20.7 million head. Even allowing for an extra working day during the month this year, this confirms that supplies remained plentiful. At 10%, growth in Spain remained a key contribution to the increase but there were also double digit percentage increases in France and Poland, among others. Across the major producers, only Denmark showed lower throughputs for June but its figures have been unusually volatile this year and must be treated with some caution. Pig meat production in the EU during the month was up even more, being 9% higher on the year at 1.9 million tonnes.

Canadian hog herd stable despite price volatility

The Canadian hog industry remained stable over the year to July 2015, with the total number of pigs increasing by a small margin of 1% to 13.2 million, according to figures from Statistics Canada. This is despite the high prices of the previous year which do not appear to have had much impact on the breeding inventory either, given the cautious nature of Canadian producers. Total slaughter pig numbers have also increased by 1%, with the over 81kg category showing the greatest signs of growth.

This year’s pig prices have been lower, driven by the US market but mitigated by the weakness of the Canadian dollar against the US dollar. America still remains the largest market for Canada, with a quarter more pork being exported to the US in the first six months of 2015. Otherwise, Canada is still recovering from the disruption which was experienced worldwide within the pig industry in 2014, particularly due to the Russian sanctions. This led to an increase in exports to a range of smaller markets such as Taiwan and Australia but these failed to offset the loss of Russian sales.

Feed market update

UK Nov-15 wheat futures closed at £111.90/t on Tuesday (8 September), down £2.10/t week on week. Furthermore, on Thursday (3 September) the contract reached another new low of £110.50/t. Chicago (Dec-15) wheat futures followed the trend and closed at $174.52/t, down $4.13/t on the week. However Chicago maize futures prices (Dec-15) recorded a smaller decrease on the week closing at $144.98/t compared to $145.28/t a week earlier. In recent days however, international grain futures prices have increased, supported by expectations of a cut to US maize and soyabean yields by the USDA in Friday’s (4 September) report.

UK harvesting slowed down last week, due to wet weather, with 60% of the combinable crop area cut as at 1 September. In the latest harvest report by ADAS, prolonged delays in some regions have resulted in lodging and blackening of remaining wheat and spring barley crops.

Chicago (Nov-15) soyabean futures prices closed at $323.04/t on Tuesday (8 September), up $1.93/t week on week. However in the UK as at 7 September, rapemeal (34% ex-mill, Erith) averaged £169/t down £3/t week on week. Similarly Brazilian soyameal was £285/t, down £3/t since the previous week. Informa Economics have raised their US soyabean yield estimate to 3.16t/ha from 3.06t/ha previously.

Nevertheless, uncertainty remains around the harvest area estimate with Informa not expecting the USDA to change the official figure until the October report.

EU weaner market weakened even further

The average EU weaner price for the week ended 30 August stood at €32.39 per head, leaving prices far below the 2014 levels. Prices so far this year have followed their normal seasonal pattern, peaking at €44.93 in the week ended 12 April but have followed the same downward trend evident in 2014 with prices up to €10 lower. Breeders are finding themselves in a loss making position given the weak finished pig market and despite low feed prices. The situation has become critical including in the largest producing country Germany with breeders making greater losses than finishers. Normally the EU weaner price is more stable during the autumn months and this has started to occur in Germany.

Germany, Spain and the Netherlands have all seen large falls in the last three months of €14.10, €10.54 and €10.25 respectively. Poland and the UK have registered smaller decreases of nearer €5 over the same period with an even smaller reduction in Denmark. The EU average has fallen by €8.04. Weaner prices for all major producers are now well down compared with the previous year. Spain has shown the largest fall of nearly €14. The Spanish price, at €20, is now the second lowest in the EU after the Netherland where the price now only averages €14 per head.

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