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AHDB Pig Market Weekly

12 November 2015

AHDB Pig Market Weekly - 12 November 2015AHDB Pig Market Weekly - 12 November 2015


UK pork imports fall back in September

Following two months of strong growth, UK imports of pork decreased in September by 7%, compared with a year earlier, to 28,700 tonnes, according to the latest figures from HMRC. This is the lowest level of imports for September in over a decade. Nevertheless, for the first nine months of the year, imports were the largest amount over the same period of time since 2011, although only 1% up on last year. While volumes declined in September, the value of pork imports was also down, by 21% on the year, at £47.4 million, as unit prices were sharply lower. This suggests that UK pig meat supplies were meeting more of domestic demand.

Denmark, the largest exporter of pork to the UK, sent 6% less in September compared to a year before, while Germany exported 9% less. Imports from the Netherlands were also down, by 4% to 44,400 tonnes. The overall decline was mitigated by a sharp rise in imports of Spanish pork, which were up by more than half over the last three months including a similar growth rate in September. Bacon imports also decreased in September, by 10%, with lower Danish shipments contributing to the fall. Once again, the value of trade for September declined, by 18% year on year. Processed and sausage imports did increase in September, with higher shipments from Germany and Ireland contributing.

In September, pork exports were slightly up compared to a year before, at 17,900 tonnes, with shipments to Denmark, likely for re-export, and smaller markets such as the US and Poland being contributing factors. Exports to China, the UK’s largest market, decreased by 4% year on year, which may be an indication that its economy is easing. The total value of exports decreased again in September, by 11% to £18.8 million, compared to a year earlier. However, this is still the highest value since October 2014, as shipments rise seasonally at this time of year. Pig offal exports had a very strong month and were up by 88% in September, with shipments to China more than doubling to a record 3,500 tonnes. Exports to Hong Kong were also up, albeit marginally, while sales to the rest of the EU rose by more than half.

Small increase in Danish pig herd

Total pig numbers in Denmark showed a marginal increase in the year ending 1 October, according to the latest census figures released by Statistics Denmark, being ahead by 49,000 head. With numbers continuing to grow, the herd is now at its highest level since the first quarter of 2010, despite growth dropping off slightly compared to the previous year. This was mainly driven by the increase in young pigs (under 50kg), which were up by 3% on the year. However, this was offset by a decline in slaughter pigs (over 50kg), resulting in the overall stability. Live weaner exports continued to grow throughout the year, with Germany and Poland remaining as the main destinations, which explains the differing trends.

The total breeding herd recorded a marginal decline on the year, with numbers dropping to just over 1 million head. This was mainly due to a decrease for in-pig gilts, down by nearly 2%, while the number of lactating sows was also slightly lower. In contrast, numbers of in-pig sows were up on the year, albeit only by 1,000 head. Looking ahead, maiden gilts showed an increase of 7%, indicating signs of positivity for the future, despite the difficult financial position of many Danish producers. Meanwhile, piglet numbers decreased by half a percent compared to October 2014, which could indicate a slowdown in productivity improvements.

UK pig prices

For week ended 7 November, the EU-spec SPP fell by 0.86p to 126.25p/kg. Once again the current price is at the lowest since the SPP series began in April 2014 and the lowest point since May 2008 based on the DAPP series. The current quote is almost 22p below the same week in 2014 although the gap narrowed slightly compared with the previous week. The SPP has been affected by the higher level of supply compared to demand as estimated slaughterings for the same week increased by 2,300 head to 181,000 head.

Compared to the same week in 2014 throughputs though were only marginally up. The average SPP carcase weight increased for the second week to 82.63kg however compared to last year it was 70gm less. The average probe measurement increased to 11.6 mm and was the same as a year earlier.

The EU-spec APP for week ended 31 October fell for the ninth consecutive week, to 130.78p/kg. The current quote is 23p behind the same week in 2014. The gap between the SPP and the APP for the same week has dropped just below the 4p threshold as the SPP increased slightly in contrast to the fall in the APP.

Both categories of weaners record a fall in price in the week ended 7 November with finishers reported to be nervous about how the finished market will pan out in the new year. The 30kg weaner price decreased by just over 40p to £42.33/head, the lowest price since October 2012. After a small rise in price in week ended 31 October, the 7kg weaner price fell by just over £1 to £31.45/head, the lowest price since the 7kg weaner series began in October 2013. Overall, both quotes remain well below the levels recorded in the same week of 2014 by £6.90 and £4.30 respectively.

Exports fall from the US and Canada

US pork exports for the first nine months of 2015 declined by less than 1% year on year to 1.1 million tonnes. The decrease, of 42,000 tonnes, comes as a surprise given US pork production is running 8% higher after the continued recovery from PEDv, leading to the expectation that exports would rise. However, the strong US dollar has hindered trade. Higher volumes of pork exported in the second and third quarter of 2015 offset the much lower figures recorded at the beginning of the year. Mexico retained its position as the largest market for US pork, with exports rising by 10%. The Asian market became unbalanced for the US, with shipments to both Japan and China during the months of January to September down on the previous year, by 4% and 22% respectively. In contrast, trade to South Korea significantly increased, ahead by 40%. Unit prices of pork have trended below last year’s levels throughout 2015, leaving the total value of pork exports at just over $3billion, down by 18%.

Canadian pork exports recorded a larger fall of 4% year on year in the first nine months of 2015, to 620,000 tonnes. Exports have declined throughout the year, with the lowest volumes being seen in the third quarter. The US remained the dominant destination, taking nearly 19% more than in the same time period of 2014, whilst Mexico also recorded an increase, of 34%. Volumes destined for Japan and China declined by 6% and 24% respectively, whilst trade with Russia ceased altogether as sanctions remain in place. In line with the US, the total value of Canadian exports for the first three quarters of 2015 fell by 15% to just under C$2 billion.

Domestic demand driving EU recovery

Despite a less supportive external environment, with a slowdown in growth in the emerging economies, the economic recovery in the euro area is continuing. Output rose by 0.4%, quarter on quarter, in the second quarter of 2015, giving an annual growth rate of 1.5%. In the UK, output rose slightly faster than the EU average, at 0.7%, giving an annual growth rate of 2.3%. A similar rate of expansion is expected for next year, based on the EU Commission’s latest economic forecasts.

A rise in real disposable income and a fall in oil prices have combined to drive a robust increase in private consumption. In addition, data on consumer confidence is in line with this increase. In Spain, Ireland and Portugal the recovery of the labour market, in terms of both employment and wages, has been relatively strong, leading to higher increases in disposable income and real consumption growth. In the UK, real disposable incomes are rising for the first time since 2007, largely due to food and fuel deflation.

The continued recovery within the EU economy and, in particular, private consumption, is potentially good news for the pig meat industry. The rise in consumer confidence and increased private consumption may translate to higher demand for pig meat as well as a transfer of demand to higher value products and cuts.

Feed market update

It was another fairly quiet week for UK feed wheat futures. The Nov-15 contract closed at £113.30/t on Tuesday (10 November), down just £0.10/t compared to a week earlier. However, a larger fall was recorded by the US futures market (Chicago Dec-15). Last week, the EU Commission raised estimates for EU-28 wheat production and also stocks as EU granting of export licences continue to lag behind recent years.
At a global level, the USDA made few changes to supply and demand balances for wheat in its November report compared with October’s estimates. In line with expectations, global ending stocks were revised down slightly (by 1.2Mt). In contrast, forecasts of the global maize supply and demand balance from USDA showed more changes compared with those of a month ago. For the UK despite another big domestic wheat crop in 2015 and obvious surplus, it has continued as a net-importer of wheat in the first quarter of 2015/16 (July to September), although to a lesser extent than a year earlier.

Oilseed futures prices in both Paris and Chicago closed lower than a week ago. Chicago soyabean futures (Jan-16) closed down $8.64/t on Tuesday to $314.31/t, while Paris rapeseed futures (Feb-16) fell €6.75/t to €374.75/t. UK rapemeal (34%, ex-mill, Erith) for December was reported at £158/t on Friday (6 Nov), down by £5/t week on week. Soyameal prices for November also decreased Friday to Friday with both Brazilian soyameal (48% ex-store, Liverpool) and Hi-pro (ex-store, East Coast) down £3/t to £268/t and £255/t respectively. In the latest USDA report (released 10 November), US soyabean production was uplifted by 2.5Mt in November.

September GB animal feed statistics from Defra show that the usage of oilseed rape cake and meal in the production of compound and other processed animal feedstuffs was down year on year while the usage of soya cake and meal increased.

Compound pig feed production rising again

UK compound pig feed production in the third quarter of 2015 was 4% higher than in the same period last year, at 467,000 tonnes, according to latest figures released by Defra. This resumes the upward trend which has been apparent for most of the time since 2010 but which seemed to have stabilised earlier this year. The growth in the latest quarter was mainly due to a 9% rise in grower feed output and 3% for finisher feed, suggesting more pigs were being fed. This is consistent with latest production forecasts, which anticipate further pig meat production growth in the coming months. Only slightly more breeding pig feed was produced than a year before, consistent with a broadly stable breeding herd. The latest release also shows that the average price of compound pig feed was similar to the previous quarter at £237 per tonne.

Overall production of compound animal feed was 5% higher, with poultry feed rising particularly quickly, up 13%, while less ruminant feed was produced. With 2015 harvest supplies becoming available during the quarter, there was a shift in the ingredients used within feed. In terms of cereals, increased use of wheat (up 9%) displaced other grains, with barley use down 11% and maize down 7%. There was a similar pattern for proteins, with 13% more soya meal used at the expense of rape meal (-10%) and sunflower meal (-12%).

New edition of MeatStats published

MeatStats, AHDB's set of data tables covering different aspects of the UK and global meat industry has now been updated to include data up to the second quarter of 2015. MeatStats consists of 13 tables, covering the UK and global meat market. As well as pork, MeatStats tables also cover beef, lamb and poultry meat and provide time series data back to at least 2000 and, in most cases, as far as 1990. Some tables also provide quarterly data for 2014 and 2015.

Between them, the tables cover data on slaughterings and production, international trade, consumption, retail purchases and prices, abattoirs, livestock numbers and seasonality. The MeatStats tables, either individually or as a complete set, can be downloaded by clicking here.

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