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AHDB Pig Market Weekly

08 October 2015

AHDB Pig Market Weekly - 8 October 2015AHDB Pig Market Weekly - 8 October 2015


New trade deal could affect global pork trade

On Monday, 12 countries around the Pacific Rim reached agreement on a new trade deal, the Trans-Pacific Partnership (TPP). The deal covers 40% of the world’s economy, with the USA, Canada, Mexico, Japan, Australia and New Zealand among the countries involved. Although the full details are yet to be published, it is expected that many tariffs on agricultural products, including meat, will be reduced or eliminated, probably over a transitional period of up to 15 years. The TPP still needs to be ratified by the individual countries, a process which is likely to take several months. In particular, detailed scrutiny can be expected in the US, where there is a widespread belief that previous trade agreements have cost jobs and the deal is opposed by some presidential candidates from both parties.

In terms of pork, the main importers among TPP signatories are Japan, Australia and Mexico. The US, Canada and Chile are all pork exporters. While trade between Mexico, Canada and the US is already governed by the earlier NAFTA agreement, the new deal could give these exporters an advantage in Japan and Australia. Outside the EU, Japan is the world’s largest pork importer. Last year, the US and Canada supplied around half of Japanese pork imports, a share which has fallen from over 60% in 2012 as shipments from the EU have risen. Mexico and Chile also account for over 10% of Japanese imports between them. The TPP may make it harder for EU exporters to compete on this important market and could see its market share fall again.

Although Australia is a smaller market, importing just over 140,000 tonnes last year, compared to Japan’s 830,000 tonnes, it too has seen the EU making inroads in recent years. The share of imports from the US and Canada has again fallen from over 60% in 2012 to around half now.

Value of pork traded within EU falls

Around 3% more pork was traded between EU Member States in the first half of this year, compared with a year earlier, according to export figures from Eurostat. However, with unit prices around 10% lower than in January-June 2014, at just under €1.90 per kg, the value of the trade was 7% lower. With around 5% more pig meat produced in the EU during the period and exports to non-EU markets only slightly higher, an increase in trade was perhaps inevitable. Nevertheless, the figures do suggest that a higher proportion of output was retained in its country of origin this year, which will have added to price pressure on some markets. It is also worth noting that import figures, which are thought to be slightly less robust, contradict the export trend and actually show a small fall in intra-EU shipments.

Looking at individual countries, the most significant export growth was from Spain and Poland, up 12% and 27% respectively. The former was because of a sharp rise in production, while the latter was due to Polish pork being excluded from several non-EU markets over concerns about ASF. This meant that markets had to be found within the EU, allowing it to overtake France as the sixth largest supplier to other EU countries. Import growth was more widespread but was apparent in most eastern Member States, led, somewhat paradoxically, by Poland. The Czech Republic, Croatia, Romania and Slovakia were other notable growth markets in Eastern Europe.

UK pig prices

The EU-spec SPP continued to fall in the week ended 3 October, with prices dropping to 129.22p/kg. This is the fifth consecutive week in which prices have declined, resulting in a record low since the SPP series began in April 2014. Taking into account the previous DAPP series, this is the first time the price has dropped below 130p/kg since June 2008. Supply and demand played a large role in this decline, with estimated slaughterings for the week increasing by 5% to 185,600 head. Numbers also remain up on the figures recorded in the corresponding week in 2014, with throughputs up by more than 2% for the week ended 3 October. The average SPP carcase weight for the same week rose to 81.72kg, an increase of 160g, which took weights back up to the figure two weeks before. However, they still remain below those recorded in the corresponding week of 2014, with weights down by 330g year on year.

The EU-spec APP fell for the fourth consecutive week, to 134.28p/kg, in the week ended 26 September. The price remains 24p behind the figure for the corresponding week in 2014. The gap between the SPP and the APP for the same week widened to 4.2p/kg, remaining above the 4p threshold which has been the case since July.

The 30kg weaner price increased by over a pound to £44.52 per head for the week ended 3 October 2015, reversing some of the fall from the previous week. However, 7kg weaner prices dropped two thirds of a penny to exactly £32 per head. This is the lowest price reached since the data series began in July 2013. Once again, weaner prices for both 30kg and 7kg categories remain well below year earlier levels.

Changing consumption trends require innovation

The reasons behind consumers’ shopping choices have changed as their lifestyles have altered. There has been a steady drive for convenience, linked to changing household structure and busier lives. Consumption of all proteins at home has declined amidst a recovery in the frequency of consumers eating out and competition from alternative convenient meal options. Over this time, the number of meals featuring pork was down 4%. However, innovative new dishes such as pulled pork could help to keep the category relevant.

Dutch pork exports remain strong

Dutch pork exports continue to grow, with levels for the first six months of the year totalling 409,700 tonnes. This was a 6% increase on the previous year. The EU remains the dominant market for Dutch pork, with exports increasing by 3% on the corresponding time period in 2014. Purchases from Italy and the United Kingdom saw declines of 4%, whereas Germany increased its imports from the Netherlands by 14%. In part, this replaced exports of Dutch pigs to Germany, which were lower (see below). Trade with non-EU countries demonstrated strong signs of growth, with overall shipments increasing by 18%. This was predominately driven by China, Australia and South Korea, with sales to the former up more than 8-fold, while the other two countries recorded increases of 65% and 46% retrospectively; Japan saw a more modest rise of 4%.

Despite the increases in export volumes, the overall value of shipments for the first half of 2015 fell by 6% compared to the year earlier, to €759 million. The decline in unit value of over 11% was the main driver of this reduction.

Continuing on from trends which began in 2014, live pig exports remained well below the levels seen a year before. Numbers declined to just below 2.7 million head, a drop of 43%, as a higher proportion of pigs are being retained on the domestic market. Figures for both Germany and Belgium were halved in comparison to the previous year, resulting in the overall decline. Both weaner and slaughter pig numbers were lower. Despite this trend, weaner exports to Spain were up by a fifth, due to the increase in sales in the second quarter of 2015.

Feed Market Update

International wheat prices continued to gain over the past week, as early new crop concerns persist. UK feed wheat futures prices followed suit, though to a lesser extent, with the Nov-15 contract gaining £1.30 in the week to Tuesday, when they closed at £116.80/t. Prices are now back to levels not seen since mid-August. Dry weather continues to affect planting in Russia and Ukraine and concerns have also been mooted about slower winter wheat planting in parts of the US. The Russian government approved proposals to reduce the export tax on wheat from 1 October to support Russian wheat exports, which have got off to a slower start than the last couple of seasons. An estimated 27% of the US maize crop had been cut by 4 October, slightly behind the average at this point in the year. Nonetheless, the progression of harvesting means markets will soon have more clarity on US maize yields and the production number in this Friday’s monthly USDA report is likely to be closely watched.

Chicago soyabean futures had a variable week before closing slightly higher. In contrast, Paris rapeseed futures gained steadily. For soyabeans, a key driver has been the rapid progress of the US harvest, which is bringing fresh supplies to the market and keeping a lid on prices. In contrast, new crop concerns continue to support rapeseed futures. Prices for oilmeals in the UK also showed different trends. UK rapemeal prices (34%, ex-mill, Erith) fell for the seventh week running; prices for October were reported at £157/t on Friday, down by £4 on the week. Hi-pro soyameal prices (ex-store, East Coast) showed a smaller decline, down £1 week-on-week to £264/t. In contrast, Brazilian soyameal (48% ex-store, Liverpool), was reported £1 higher than the previous Friday at £282/t.

Belgian pork exports up marginally

In the first half of 2015, Belgium exported 346,300 tonnes of pork, less than 1% up compared with the same period in 2014. As a result of an 11% fall in the price of Belgium exports compared to the same period last year, the value from January to June totalled €575.3 million, down 10% on the first half of 2014. Third country exports remain small, accounting for little more than 5% of total shipments, and were down 2% on the year.

Exports to Belgium’s main destination for pig meat, Germany, which takes over a third of shipments, were down 6% year on year. In contrast, supply to Poland, Belgium’s second largest market, recorded a 19% increase in the period, compared to the same time last year. With Germany and Poland importing two thirds of Belgium’s supply between them, the remaining third is distributed amongst smaller markets. Shipments to the Netherlands and Italy fell by 7% and 16% respectively year on year, while supplies to the UK, a relatively small export market for Belgium, increased by 24%.

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