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AHDB Pig Market Weekly

18 December 2015

AHDB Pig Market Weekly - 18 December 2015AHDB Pig Market Weekly - 18 December 2015


UK pork imports up again in October

For the third time in four months, UK pork imports rose strongly, compared with a year earlier, in October. At 33,900 tonnes, shipments were 11% higher than in October 2014. The growth was largely down to a 20% rise in imports from Denmark, mainly made up of bone-in legs, and a surge in purchases from Spain. The latter continues a recent trend, as shipments nearly doubled to 3,100 tonnes. With prices remaining much lower than last year, the value of pork imports was down 1% at £55.7 million.

In contrast, bacon imports were 6% down on the year, at 22,900 tonnes. This was largely down to lower shipments from Denmark, suggesting more pork is being imported for curing in the UK, as appears to have been the case for most of the year. There were small increases from the two other major suppliers, the Netherlands and Germany. Imports of sausages were up on October 2014 but less processed products, mainly hams, were imported.

UK pork exports in October were little changed from a year earlier, at 17,400 tonnes. Increased sales to Ireland, China and the Netherlands were offset by lower volumes sent to countries such as Germany, Denmark and Hong Kong. There were strong sales to the United States, which took three times as much UK pork as in October 2014 and accounted for over 5% of the monthly total. A 5% year-on-year fall in average prices meant that the value of exports was down by a similar amount, at £18.9 million.

Cured and processed pig meat exports were lower, mainly due to reduced sales to Ireland. However, October was another good month for UK pig offal exports, which were nearly 60% higher than a year before, at 5,600 tonnes. Apart from Ireland, all significant markets took more this year, led by an 80% rise in shipments to China.

EU prices hit new lows

Since its most recent peak in late September, the EU average pig price has fallen for 11 consecutive weeks, losing over €22 per 100kg during that time. The latest quote, for week ended 6 December, was €126.35 per 100kg, the lowest level recorded since April 2005. In sterling terms, the average price has now dropped below 90p/kg. Reports suggest that the recent declines have mainly been demand driven, as EU consumers continue to buy less pork and other pig meat products. Although pigs have not been in short supply, numbers do not appear to be that much higher than a year ago, when prices were also falling but were around €10 higher than they are now. In the latest weeks there has been some sign of prices stabilising but the market usually falls further post-Christmas. Whether that happens this year may depend on how successful the EU’s Private Storage Aid scheme is when it opens on 4 January.

Price falls were apparent over the last month across all the major producing Member States. Even Danish prices were forced down by €5 in the latest week. Prices in Germany stabilised in the week ended 6 December but were nearly €11 lower than a month before, with similar trends in Belgium, the Netherlands and Poland. Spanish prices followed the same direction but the month-on-month fall was only €7. French prices continued to fall, though, recording the largest drop among major producers, of €14 compared with four weeks before. With UK prices broadly stable in euro terms, the gap compared to the EU average was up to almost €50 per 100kg (35p/kg).

While reference prices provide a useful indication of trends across Member States, they don’t necessarily provide a consistent picture of the overall price paid to producers. For more explanation and analysis of the true level of prices across Europe, click here.

UK pig prices

In the week ended 12 December, the EU-spec SPP fell by 0.45p to 125.16p/kg compared to the previous week while slaughterings increased. This represents the fourth consecutive week of price decline with the current quote almost 19p behind the same week in 2014. The gap though between the two years narrowed as the SPP last week fell at a slower rate than a year earlier. Estimated slaughterings for the week amounted to 189,800 head, up on the previous week by 9,800, but they were still over 10,000 lower than a year earlier for the third consecutive week. The average SPP carcase weight fell by just over half a kilo to 81.39kg, to the lowest level since mid-September suggesting producers were marketing their pigs earlier. Once again, however, average weights continue to be slightly heavier than the corresponding week in 2014. The average probe measurement remained unchanged at 11.4mm.

The EU-spec APP fell to 129.25p/kg in the week ended 5 December, a drop of 0.62p week on week. This leaves the current quote just less than 19p behind the same week in 2014. The gap between the SPP and the APP in the same week decreased to 3.64p as the APP fell at a faster rate.

Opposite price movements were recorded in the weaner market during the week ended 12 December. The 30kg weaner price increased to £41.89/head, up just over £2 compared to the previous week even though numbers were well up. Spot prices increased and there were some changes in the mix of pigs under contract. However, this rise only brought prices back to the levels of mid-November. In contrast the 7kg weaner category recorded a drop in price of 86p, leaving the quote at £30.23/head. Despite the price fall, throughputs were down on the week. Both the 30kg and 7kg prices continue to run behind the prices recorded in the corresponding week in 2014, currently back by around £5.

Producer share of retail price steady in November

Farmgate prices fell once again in November, to the lowest level this year, leading to the share of retail price received by producers staying at 34%, despite lower retail prices. Since January, farmgate prices have fallen by 10% while the percentage share received by the producer has fallen by three points over the same time frame. In November, the average retail pork price decreased by 6p/kg (around 2%). However, while the average retail price for November was 3% lower than the same point last year, farmgate prices have recorded a greater reduction over the same time frame of 14%. Therefore the producer’s share of the retail price was four percentage points down on the year.

Average retail pork prices were slightly down on the month in November, with an average drop of 1% across all the cuts monitored by AHDB MI. Boneless shoulder recorded the largest decrease of 4% month on month, while loin chops and diced pork both recorded a fall of 3%. Fillet of pork and boneless leg recorded smaller decreases of 2% and 1% respectively. Nevertheless, both traditional pork sausages and minced pork increased in price during November, by 4% and 2% respectively. Compared with November 2014 there were also contrasting developments by cut. While fillet end leg was 6% more expensive than last year, diced pork was 6% less expensive. Other cuts recorded smaller year on year changes with boneless shoulder and loin chops down by 5% and 4% respectively contrasting with a 2% rise in loin steaks.

Russian imports run lower than 2014

In the first nine months of the year, Russian pork imports amounted to 212,000 tonnes, down by 22% year on year. With restrictions preventing imports from the EU, US and Canada, amongst others, remaining in place, Russia turned to Brazil and Ukraine to meet its domestic demand for pork. Brazil maintained its position as the dominant supplier of pork, with imports increasing by 38% year on year. This took its market share to three quarters, a large increase on the 42% this time last year and 22% two years before. Shipments from Ukraine increased significantly, with volumes totalling over 20,000 tonnes, setting a new record. However, there is doubt about whether this increase in imports will continue into 2016, as Russia has stated that it will cease the importation of Ukrainian pork if a trade agreement between the EU and the Ukraine is implemented. Volumes from Chile and Serbia also recorded an increase, ahead by 22% and 34% respectively.

Despite the volume of pork for the first nine months of the year currently running below 2014 figures, imports in the third quarter of 2015 were ahead by 15%. This was the largest quarterly volume since the beginning of 2014, when the first ban on EU pork was introduced.

Unit prices of pork are currently higher than those recorded in 2014, by 39% in rouble terms during January-September 2015, largely due to the weakness of the Russian currency. The average unit price in the third quarter of 2015 stood at ?208 per kg. In line with this, the total value of imports in the first nine months of 2015 totalled ?40.7 billion, up 8% year on year. However, due to the continued depreciation of the Russian currency, this value was down by 36% in terms of US dollars.

Feed market update

Despite the USDA increasing its global wheat production forecasts and Argentina cutting export tax on wheat and maize, both US and European grain futures prices closed up on the week (ended 15 Dec). This is partly due to the US dollar weakening against several currencies. On Tuesday (15 Dec), UK feed wheat futures prices (May-16) closed slightly up (£0.40/t) on the week at £117.20/t. Both May-16 Chicago wheat and maize futures prices closed up Tuesday-Tuesday. Global wheat stocks forecasts and production for 2015/16 were revised up by the USDA in its latest world supply and demand estimates last week.

In the UK, higher than average rainfall has continued since November and is forecast to remain into the coming week. As at the week ending 26 November the price discount for UK ex-farm gate feed barley compared with feed wheat tightened and so barley could become a less attractive animal feed ingredient. However, over the past two weeks the discount has widened.

Both May-16 Chicago soyabean and Paris rapeseed future closed down on the week on Tuesday. The fall in soyabean prices last week can be partly attributed to the new President of Argentina’s decision to cut export taxes by five percentage points on soyabeans, in a bid to try and rejuvenate the nation’s agricultural sector.

This sentiment was reiterated by the latest USDA supply and demand estimates released last week with global bean trade increased by 0.5Mt from the November forecast. December UK rapemeal (34%, ex-mill, Erith) was down £7/t at £139/t on Friday (11 Dec) compared to a week before. Brazilian soyameal (48% ex-store, Liverpool) also declined on Friday by £6/t on the week to £258/t. Hi-pro (ex-store, East Coast) was priced at £247/t a decrease of £5/t Friday to Friday.

EU pig meat production down in September

For the first time this year, EU pig meat production was lower than a year earlier in September, albeit only marginally. At 1.89 million tonnes, output was just 2,000 tonnes less than in September 2014. This continued the slowdown which had been apparent in previous months and meant that less than 2% more pork was produced in the third quarter than a year earlier, compared with 5% growth in the first half of the year. Pig slaughterings during September were down 1% on the year, at 21.2 million head, also the first decline of the year to date. EU pig prices were relatively firm during September, reflecting the reduction in supplies but have since fallen sharply. Although partly demand driven, this suggests that volumes may have picked up again since September.

To some extent the fall in production during September was due to a sharp 20% drop in Danish output, although its figures have been unusually volatile this year, perhaps due to some change in reporting periods. However, there were also declines reported by Germany (-1%), Belgium (-5%) and Poland (-4%), among others. These falls were largely offset by the ongoing growth of Spanish production, up 4% year on year in September, along with rises elsewhere, including France (+2%), Italy and the Netherlands (both +11%).

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