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AHDB Pig Market Weekly

07 January 2016

AHDB Pig Market Weekly - 7 January 2015AHDB Pig Market Weekly - 7 January 2015


GB production costs still above average

Despite still having above average production costs, Great Britain was one of only two major producing countries in the EU where, on average, pig producers made money in 2014. This is among the key conclusions of the latest analysis of pig production costs from InterPIG, an international group of pig economists. Despite this, GB costs remain around 5p/kg above the EU average, at an estimated 139p/kg in 2014. In most EU countries, sharply falling pig prices in the second half of the year meant that what had promised to be a good year for producers turned out not to be. The more favourable position of GB producers was because of the significant price premium which was apparent throughout the year.

Across all the countries covered by the report, production costs were significantly lower in 2014 than in the three previous years. On average, feed prices were down by 16% in sterling terms, with the fall in GB slightly larger than this. As a result, total production costs were 13% down on 2013 in both GB and across the EU. Declines were even sharper in North America, contributing to the improved margins there.

Since 2014, the financial position of producers has worsened across all of the countries covered. There have been no dramatic movements in feed prices since the start of 2015 but pig prices have declined sharply everywhere, meaning producers are likely to have lost money in most countries during 2015, with some making large losses.

Information on production costs and physical performance across the world’s major pig producing countries are analysed in more detail in the annual AHDB Pork report Pig Cost of Production in Selected Countries. The 2014 edition will be published soon on the AHDB Pork website.

US pig herd at record size

As at 1 December, the US pig herd had increased to 68.3 million head, according to the latest Hogs and Pigs report published by the USDA. This was 1%, or about 500,000 head, higher than the same point in 2014 and marginally up on September’s revised estimates. Yet again this is the highest number of hogs and pigs recorded since the estimates began in 1988. Diverging trends appeared amongst the different weight bands in December. The number of pigs weighing less than 50lb (23kg) and 50-119lb (23-54kg) were down by 1% and 0.5% respectively year on year and both had also declined since September. Nevertheless, the number of pigs weighing 120-179lb (54-81kg) increased by 2%, while pigs weighing 180lb (82kg) and more recorded a greater increase of 5% on the year. These figures suggest that while there may be an annual increase in slaughterings in the short-term, throughputs may drop below year earlier levels as we move further into 2016.

The US breeding herd and number of piglets produced recorded differing trends in December. While the breeding herd increased by 1%, compared to the same point in 2014, the number of piglets born decreased by 1%. The decrease in number of piglets is not due to a reduction in productivity but rather is because the number of litters farrowed between September and November declined by 4% on the year, with forecasts of sows farrowing for the next quarter down as well. The average number of pigs weaned per litter from September to November was a record 10.53 head, which is 3% up on the year and an increase of 1% on the previous quarter.

The latest USDA cold storage report records that, as at 1 December, there was 255,000 tonnes of pork in storage, 14% more than the same point in 2014, but 7% less than the previous month and 14% less than September. This would suggest that supply and demand is balancing out more and, with the possibility of slight reductions in production ahead, the market situation for US producers could eventually improve.

UK pig prices

In the week ended 2 January, the EU-Spec SPP fell by 1.49p compared to the previous week, to 121.97p/kg. This is the seventh consecutive week that prices have fallen and equalled the largest weekly drop since last February. In week ended 26 December, the SPP was at 123.46p/kg a decrease of 0.77p/kg on a week earlier. The fall in price over the past two weeks comes as demand lessens after the Christmas procurement period, while slaughterings for this week were estimated to be lower than the corresponding week a year earlier. The current quote is over 20p behind the same week a year ago, despite the price decreasing at a similar rate then.

Estimated slaughterings for week ended 2 January increased by 3,500 head compared to a week earlier to 112,700 head. However, with the Christmas holiday shutdowns, estimated slaughterings for week ended 26 December fell by 77,500 head week on week, to 109,200, although this was 17,400 head more than the same week in 2014. The average SPP carcase weight for the last two weeks has increased as producers hold onto pigs for longer over the festive period. For week ended 2 January, the average carcase weight was 83.02kg, the heaviest weight since February 2015.

The EU-Spec APP fell by 1.47p to 127.68p/kg in week ended 26 December, the largest weekly drop since early 2015. In week ended 19 December, the APP fell less sharply, by 0.11p to 129.15p/kg. The quotes for the past two weeks are both down on the year before, with the APP for week ended 26 December 19p lower than a year earlier. Having reached its highest level since June in the previous week, the gap between the SPP and APP narrowed to 4.22p as the SPP recorded a sharper fall in Christmas week.

Prices in the weaner market recorded diverging trends in the week ended 2 January. 30kg weaner prices fell by £1.85 per head to £39.04 per head, which is the lowest price since September 2012. However 7kg weaner prices increased week on week by 44p per head to £31.55 per head. In week ended 26 December both 30kg weaners and 7kg weaners increased in price on the week, to £40.89 per and £31.11 per head respectively. The current quotes for both weaner categories are behind those of last year, by £5.34 (30kg) and £3.11 (7kg).

German pig numbers lowest since 2011

Provisional figures from the November pig census show that the number of pigs in Germany had fallen 3% since last November to 27.5 million - the lowest level seen since 2011. Declines were noted across the board but were particularly prevalent for breeding sows (-4%) and in-pig gilts (-6%), inferring that breeding herd rationalisation continues following a challenging financial year with declining pig prices. Over the past few months, the prices for weaners in Germany have declined sharply, causing a large impact on breeding farms and resulting in a negative impact on the number of breeding sows and, therefore, young pigs. All pig types saw a decline, implying that optimism in the industry is falling and producers are looking to streamline their operations.

The impact of the breeding herd reduction was felt with a reduction in the numbers of young pigs and slaughter pigs (both down 4%). This should result in a decline in the production levels as fewer pigs are available to come forward for slaughter. The reduction in the number of breeding sows is also likely to cause a longer term decline in production levels going through 2016, which may lead to a tightening in supply, potentially providing some support to prices.

The census also indicates that the decline in the number of pig farms continued throughout 2015. The total number of German farms keeping pigs fell by 4% to 25,700, with breeding farms declining more sharply, by 5% to 9,600.

Dutch pork exports to non-EU destinations increase

Dutch pork exports from January to September increased by 8% to 638,700 tonnes, compared to the same period in 2014. Nevertheless, the average unit price of shipments from the Netherlands decreased by 11% year on year, meaning the overall value of exports for the first nine months of 2015 fell by 4% on the year to €1.19 billion. The EU remained the main destination for Dutch pork but its percentage share of exports was below 80%, as the increase in shipments to non-EU destinations was greater than that of those to the EU. With 17% of all Dutch pork exports going to Italy, it remained the largest individual country market. The second largest individual country was Germany, which imported 89,000 tonnes of pork, an increase of 12% year on year. Shipments to Greece, the third largest destination, and the UK, the fourth largest, increased by 2% and 4% respectively.

Outside the EU, China was the main growth market, with volumes increasing more than six-fold. Korea also recorded an increase of 46% compared to the same point in 2014. Australia imported 34% more Dutch pork than the year before at 13,900 tonnes but Dutch exports to Japan were down by 2% on the year at 20,000 tonnes.

For the first nine months of 2015, Dutch live pig exports reduced by 41% to 4 million head, compared with the same period in 2014. With more pigs being slaughtered at home, contributing to the increase in pork exports, shipments of all pig types decreased. Numbers of weaners and slaughter pigs decreased by 46% to 2.5 million head and 29% to 1.3 million head respectively.

Feed market update

On Tuesday, May-16 UK feed wheat futures prices settled down £2.70 on the week, at £115.40/t. Chicago wheat and maize futures prices (May-16) also closed lower. Trading on Chinese stock markets was suspended on Monday following a sharp drop in shares of 7% earlier in the day. The events are reported to be in response to China’s latest ‘factory activity’ release, which recorded a contraction in manufacturing activity in December for the tenth consecutive month. Agricultural markets reacted to the volatility in China, with May-16 Chicago wheat and maize futures prices settling at new contract lows on Monday. Widespread floods over the last month across the US Midwest has meant farmers have been desperately trying to find shelter for their crops. Nevertheless, the USDA yesterday released its latest crop progress and conditions report for selected states, which reported better condition ratings for most states than last season.

Chicago soyabean futures prices (May-16) closed at $316.61/t yesterday, $3.58 down week on week. On Tuesday, May-16 Paris rapeseed futures prices recorded no change week on week, settling at €373/t. Over the last week weather conditions have improved across parts of Brazil. While dryness remains widespread throughout stretches of northern and north-western Brazil, rains over the last week have helped to improve soil moisture. This has led to pressure for US soyabean prices. However, additional rains are still needed to curb dryness in key growing regions, such as parts of Mato Grosso. The latest weekly export data published by the USDA on Thursday (31 Dec) revealed the lowest weekly sales since the start of the marketing period in September for week ending 24 December.

Italian pork imports decrease

Italy imported 757,200 tonnes of pork from January to September 2015, a decrease of 1% year on year, according to the latest data released by Istat. The average unit value of shipments to Italy over the same time period decreased by 11% compared to a year earlier, with the value of imports also down 11% at €1,370 million. Shipments from Germany were down 3% on the year but still accounted for 35% of the total volume. Imports from the Netherlands and France were also down year on year by 4% and 19% respectively. In contrast, exports to Italy from both Spain and Denmark increased. Denmark has now overtaken France to be Italy’s fourth largest supplier of pork.

Despite a decrease of pork shipments to Italy, live pig imports increased by more than a quarter year on year to over 1 million head in the first nine months of 2015. Most of the increase came from a rise in shipments of weaners from Denmark and, to a lesser extent, Spain. Danish pigs accounted for over half the total, having increased by 56% on the year at 518,000 head.

Italian pork export levels are much lower than imports at 52,000 tonnes for the first nine months of 2015, a decline of 8% year on year. However exports of cured meat from Italy increased over the same time period, by 2% to 55,600 tonnes, with 43% of the total supply going to France and Germany. There was strong growth in sales to the US, which now takes over 10% of Italian ham exports.

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