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AHDB Pig Market Weekly

24 September 2015

AHDB Pig Market Weekly - 24 September 2015AHDB Pig Market Weekly - 24 September 2015


English breeding herd stable in year to June

The English pig herd decreased by 3% to 3.8 million head compared to a year earlier, according to the June Agricultural Survey figures published by Defra. The decline in the total number of pigs was mainly driven by the drop in numbers of feeding pigs in June 2015, of 4% compared to the previous year, to 3.4 million head. Numbers are back for all weight bands suggesting a fall in pig slaughterings from June onwards. However, trends from the June survey in previous years have not been supported by subsequent slaughterings. Clean pig slaughterings have remained up year on year throughout 2015, including since June, suggesting this year’s results should be treated with caution.

The overall size of the breeding herd showed a small increase of less than half a percent to 413,000 head. Within this, the female breeding herd recorded a marginal decrease of less than half a percent to 328,000 head. This is despite the number of sows in pig being up by 1% at 232,000 head; numbers of both gilts in pig and other sows were down, by 5% and 3% respectively. The reduction for the former category could partly be the result of producers retaining sows because of the ongoing low cull sow prices, which has been reflected in lower slaughterings of sows in the first half of the year. The ongoing weak finished pig market could also be impacting on producer decision making, with prices having slipped below the cost of production in the first half of 2015. However, the number of maiden gilts increased by 3% in the year to June, to 72,000 head, suggesting an upturn in replacements may now be taking place.

Mixed trends in EU’s pig herds

The EU pig breeding herd declined slightly in the year to June 2015, according to provisional figures from Eurostat. Based on results from all the major producing countries, there were 1% fewer sows than a year earlier. However, trends varied between Member States. Belgium and Poland both recorded 6% falls in their breeding herds, while Germany was among other countries with fewer sows. However, several other sow herds increased, including the Spanish one, the EU’s largest, which grew by 2%, the fastest rise recorded. There is little suggestion of any expansion of the EU breeding herd in the short-term, given that both in-pig and maiden gilt numbers were down, by 3% and 2% respectively. However, these relatively small falls don’t indicate a sharp fall in the breeding herd either.

The overall decline in the breeding herd suggests that growth in pig slaughterings should slow in the second half of this year and into next but no dramatic tightening of supplies can be expected. The likely slowdown in production is backed up by the figures for the rest of the pig herd. Total pig numbers were up nearly 2% overall but piglet numbers (under 20kg) were only 1% higher. Both are lower than the 4% rise in pig slaughterings in the first half of the year. Growth was driven by a 6% rise in the Spanish herd, which accounted for nearly two-thirds of the overall increase.

UK pig prices

High slaughter levels for the week ended 19 September contributed to the EU-spec SPP falling by 0.74 to 130.38p/kg. This is the lowest level recorded since the SPP series began in April 2014 and the last time the DAPP was this low was in June 2008. The current quote is down 26p on the corresponding week in 2014, with the gap fluctuating from week to week as prices were dropping then too. With the price having now fallen for three consecutive weeks, losing 2p in this time, there are signs that the stability of recent months may be under threat. One reason is that estimated slaughterings for the week ended 19 September were 6% up on the previous week, with throughputs totalling 186,500 head, the highest of the year so far. The average SPP carcase weight also continued to increase, reaching 81.71kg, although still remaining behind the weights recorded in the same week last year.

The EU-spec APP fell marginally for the week ended 12 September to 135.33p/kg. When compared to the same week in 2014, the price remains 23p behind, resulting in the gap between the SPP and the APP for the same week increasing to just over 4p.

In the week ended 19 September, 30kg weaner prices were up 11p to £45.21 per head, as the market remained broadly stable with feed prices still low. The 7kg weaner price also remained stable, with a minimal fall of a penny to £32.38. Once again, both prices remain significantly below the levels seen at the corresponding time in 2014.

Fewer retailer promotions impact pork performance

In the 12 weeks to 16 August 2015, the amount of pork purchased remained down on a year earlier, as shoppers continue to switch to categories such as fresh chicken and chilled ready meals, according to Kantar Wordpanel. There was less sold across nearly all cuts in this period, with pork belly, mince and leg joints contributing the largest losses. There were fewer promotions in the supermarkets across most of the cuts this year. Pork chops/steaks not only saw an overall fall in promotional activity but a noticeable shift away from volume-driving Y for £X activity to price promotions. Roasting joints were down by 5% in volume terms in the Big Four Multiples. Pork shoulder which has been performing well of late, saw volumes fall by 4% on the year, as fewer households purchased the cut and the amount purchased per shopping trip was also down. A year-on-year fall in the levels of promotional activity will have contributed to this.

In contrast, bacon volumes were up as average prices fell 4% year on year. The Hard Discounters contributed the majority of the purchase gains. However, similar price falls were not sufficient to prevent an annual decline in the amount of ham and other sliced cooked meats sold. Premium sausages again pushed overall sausage volumes up, as they were the only category to register growth in the 12 week period. Heavy Y for £X promotions or price promotions in some of the major retailers were the main drivers of growth.

EU exports remain higher in July

EU pork exports in July were up by 7%, at 144,700 tonnes, following a large increase in shipments to China. This follows the trend seen for much of 2015. This is not only higher than the level seen in 2014, which was affected in the Russian ban, it is also higher than the same month in earlier years. Volumes going to China saw the largest gains, up 80% to 42,700 tonnes, while shipments sent to Japan declined by over a quarter. Shipments to South Korea also increased, while volumes going to Australia, the US, the Philippines and Hong Kong all fell. The weakness of the euro continued to give exports from the EU a competitive advantage over product from other major exporters. Prices were 24% lower than July 2014 in US dollar terms (the dollar being the currency of international trade), while in euro terms they were only down 7%. This left the overall value of exports only marginally lower than the previous year at €326 million.

Exports of offal were also up in July, increasing by 17% on the year at 104,200 tonnes. Again this was driven by large increases in volumes going to China and South Korea, while shipments to Hong Kong and the Philippines decreased. Unit values also increased, in euro terms, leaving the overall value of pork offal up 24% at €120 million.

Feed market update

UK Nov-15 feed wheat futures have traded relatively flat on the week, closing at £111.40/t on Tuesday, down £2.10 from the previous Tuesday. During the week, the contract rebounded off the £110/t level for the second time in September, suggesting that this could be an important technical point of resistance to watch for – if the contract breaks below this level it could be a signal of further price weakness. EU wheat output in 2015/16 is forecast to reach within 1% of last year’s record high, according to Strategie Grains’ latest estimates. However, it cut its maize crop forecast to an eight year low of 57.4Mt, due to reductions in expected yields. The Chinese government confirmed on Friday its intention to continue maize stockpiling into 2015/16. This has led to surging imports of alternatives such as barley and sorghum. However, a reduction in the price offered to growers is likely to reduce the incentive to import alternative feed grains in the short term.

UK rapemeal (34%, ex-mill, Erith) prices continued to fall in the week to Friday, moving down £3 to £161/t – the lowest since October 2014. Soyameal prices also remain historically low, with hi-pro (ex-store, East Coast) down £2 to £264/t. Continuing concerns over the global economy, and resulting soyabean demand, maintained downward pressure on US soyabean futures over the week. The nearby contract closed on Tuesday at its lowest since March 2009. With the US harvest underway (7% harvested as of 20 September), the approach of renewed supplies is steadily removing the risk premium from soyabean prices. Markets were also surprised by the improvement in US soyabean conditions in the week, which may help the crop achieve the unexpectedly high yields forecast by the USDA earlier this month, adding to weakness in soyabean prices.

Growth in UK production continues in August

UK pig meat production totalled 68,400 tonnes in August, a 6% increase compared with a year earlier. The number of clean pigs slaughtered in the UK reached 819,900 in August, also up 6% on the year. The year on year growth in slaughterings was noticeable across the whole of the UK, with numbers in England and Wales up 6%, while slaughterings in Northern Ireland and Scotland showed smaller gains of 4% and 1% respectively. This means clean pig slaughterings in the UK have been consistently higher year on year since April 2014. Numbers in the first eight months of 2015 are at 7.0 million, up 4% on 2014. However, average carcase weights in August fell 0.1kg compared to a year earlier at 80.2kg.

For the third consecutive month, sow and boar slaughterings were above the levels seen in the previous year, with a 6% increase being recorded in August at 18,300 tonnes. This was potentially due to low prices being received for finished pigs leading producers to scale back their operations. This still leaves overall sow and boar slaughterings in the first eight months of the year down 2% at 162,800.

Overall pig meat production in August was up by 6% on the year, at 68,400 tonnes, following the increases in production from both clean pigs and sows and boars. This leaves production in the first eight months of the year up 5% at 592,300 tonnes.

Contrasting trends in EU pig prices

The EU average pig reference price as at week ended 13 September was up €5 compared with 4 weeks earlier, at €147 per 100kg. Prices have edged up in recent weeks and are back to mid-June levels, having been mildly fluctuating but with no clear direction during the summer. Despite this small increase, the average price is still down by around 9%, or €15 per 100kg, on the same week last year. EU pig meat production in the first half of 2015 was up 5% on the year increasing supplies available but demand has been weak both within and outside of the EU. However, EU shipments of fresh and frozen pork have picked up lately, largely driven by strong import demand from China.

In recent weeks, prices in northern Europe have been performing better than in southern Member States. Over the latest four weeks, the German and Belgian prices both rose, by €11 and €8 respectively. The Danish and Dutch prices also gained by €3 and €10. In southern Europe, the Spanish and French prices fell, by around €7 and €4 per 100kg respectively, during this period. Increased production in Spain has meant pig meat supplies have been plentiful, while the end of the holiday season will have meant some reduction in demand.

The gap between UK and the EU average price has narrowed slightly in euro terms, to around €30 per 100kg, having been €42 per 100kg in mid-August. In sterling terms, the gap narrowed from 30p/kg to 22p/kg over the same period.

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