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AHDB Pig Market Weekly

15 January 2016

AHDB Pig Market Weekly - 15 January 2016AHDB Pig Market Weekly - 15 January 2016


UK imported more pig meat in November

Imports of fresh and frozen pork grew in volume in November, compared to the same period last year, by 13%, although the value over the same period dropped 4% to £55.8 million, highlighting the decreasing prices of pork in the EU. This trend has been observed since June 2015, barring a slight dip in September. This suggests that, even though prices are falling for UK pork, buyers are looking to source increasing supplies from the EU, where the product is more competitively priced. Most of the year-on-year volume increase came from the three main suppliers, Denmark, Germany and the Netherlands, while Spanish shipments continued their strong growth of recent months.

Sausages experienced a sharp increase in import volumes from November 2014 (up by 42%), with most of this being attributed to an increase in imports from Germany and Poland. Growth in bacon shipments was a more modest 2%, as lower purchases from Denmark offset increases from the Netherlands and Germany. Although small in scale, offal import volumes continued to grow in November. Whilst the volume imported from the Netherlands decreased, this was counteracted by imports increasing from other suppliers, including Ireland and France.

Overall UK pig meat exports rose in November, driven by growth in both fresh/frozen pork and offal. Both the volume and value of exported pork grew versus the same time period last year (by 17% and 20% respectively), although the volume declined slightly compared to the previous two months. The Chinese export market has continued to grow steadily since July 2015 and the Irish market has been showing growth since the beginning of 2015. These have cushioned the decline in exports seen to the Danish market, likely for re-export, following a spike in September 2015.

Offal exports continue to increase from the same month last year, with volumes having nearly doubled and with value growth of 46% seen from the same period in 2014. Export growth to China remains strong and has increased from the previous month. Chinese shipments accounted for 43% of all offal exports in November 2015. Exports to Hong Kong also continue to grow following a steady start to the year.

AHDB Outlook Conference 2016

Bookings remain open for the AHDB Outlook Conference on Tuesday 9 February. The conference will take place at One Great George Street, Westminster, London. The AHDB Outlook Conference is an established event in the industry calendar, providing the ideal forum for supply chain planners and experts to hear about market prospects for the coming year and to discuss key issues. It is hosted by the three livestock divisions of AHDB, representing the beef and lamb, pork and dairy sectors, along with AHDB Market Intelligence (MI).
The opening address is due to be given by the AHDB chairman Peter Kendall, followed by keynote presentations by Professor Alan Matthews, Trinity College Dublin, on the referendum on UK membership of the EU and Andrew McLay of Promar International on the relative competitiveness of UK and global livestock sectors.

Delegates will also have the chance to discuss market opportunities and issues during a question and answer session with industry experts. Separate breakout sessions will follow, providing an overview of the market outlook specific to each sector. The pork session will include the latest AHDB supply forecasts, along with the wider prospects for the sector in the year ahead and a review of the outlook for the feed market.

EU Private Storage Aid scheme open

The latest EU Private Storage Aid (PSA) scheme for pig meat opened on 4 January. On the first day of the scheme, applications were lodged for 32,600 tonnes of pork and 2,700 tonnes of fats. The total of 35,300 tonnes is already more than half of the total amount which was stored during the previous scheme, which was open for two months during the spring of last year. This fast start suggests that the new scheme may be more widely used, giving it a better chance of supporting EU pig prices. Certainly, reports suggest that EU prices have firmed slightly since the New Year, at a time of year when they normally fall. While it is too early to say how much this may be attributed by the PSA scheme, it could certainly be a factor.

Over half of the applications on 4 January were for boned legs, with the remainder made up of a mix of other cuts. Fats made up just 8% of these initial applications. Over two-thirds of requests were for the minimum 3-month storage period, with most of the rest being for the full 5-months. Over 80% of applications came from just four Member States, all major exporters – Spain, Germany, Denmark and the Netherlands. Less than 300 tonnes was entered from the UK.

UK pig prices

Despite some firming in the EU market last week, UK prices did not follow suit, with the EU spec SPP for week ending 9 January falling by nearly 3p week on week to 119.09p/kg. The UK pig price, however, is still around 25p more than the average EU reference price. Nevertheless, this is the eighth consecutive week that prices have fallen and represents the largest weekly drop in prices in well over a decade. The current quote falls even further behind the same week last year, being back by 23p/kg. The fall in price over the last week comes as demand weakens as the market experiences a post-Christmas decline. In addition, estimated weekly slaughterings increased to 174,700 head. Compared to a year earlier this would mean slaughterings were up by 8,300 head. The average SPP carcase weight was also a kilo heavier than the previous week at a record 84.02kg. Similar to last week, the increase in weight is partly due to producers being unable to market pigs over the Christmas and New Year holidays.

The EU-Spec APP recorded a much smaller decline in price week on week. For week ending 2 January, the price fell 0.50p to 127.18p/kg. The current quote is 18p behind the same week last year, although the gap closed as the price fell more in 2015. The gap between the SPP and APP increased to above 5p, as the SPP recorded a sharper fall in the same week.

Prices in the weaner market recorded diverging trends, reversing the movement in the previous week. In week ended 9 January, 30kg weaner prices increased 55p per head, bringing the average price up to £39.59 per head. However, 7kg weaner prices decreased for the first time in four weeks, by 21p to £31.34 per head. The current prices for both weaner types are still behind those of last year, by £8 (30kg) and £3 (7kg).

Producer share of retail price down in December

Farmgate prices decreased once again in December, to the lowest level of the year. This fall, coupled with an increase in the average retail price compared with November led to the share of the retail price received by producers declining to just under 34%. This is the lowest figure recorded since 2002, although there could have been some methodological changes since then. For 2015 as a whole the share was down by 5 percentage points on 2014, at an average of 35%. Farmgate prices fell by 19p/kg (13%) compared with December 2014. In contrast, the average retail price fell by just over 5p (1%). This resulted in the percentage share received by the producer falling four points over the same time frame.

Retail pork prices by cut in December saw a combination of increases and decreases on the month. Boneless shoulder and leg recorded the largest increase of 2%, whilst fillet end leg and loin chops rose by 1%, with a marginal increase seen in diced pork. However, loin steaks and minced pork (both down 3%) and traditional pork sausages (2%) all recorded price decreases. Fillet of pork saw a marginal decrease of less than 1%. Compared with December 2014, average retail price showed more marked variations. Whereas fillet end leg was 7% more expensive than last year, diced pork was 5% cheaper. Other cuts that are monitored by AHDB MI recorded smaller movements.

Feed market update

On Tuesday, May-16 UK feed wheat futures prices closed down slightly (25p) on the week at £115.15/t. In contrast, Chicago wheat and maize futures prices were up on the week. The increase in US prices comes as the USDA released various reports on Tuesday. The latest supply and demand report recorded a decline in world maize ending stocks forecasts compared to last month, while the US winter plantings release revealed a decline in winter wheat area. According to the latest trade data from HMRC the UK is still a net importer of wheat, albeit by a small amount, so far this season. Additionally UK maize imports were at the highest level since March 2014 in November.

Chicago soyabean futures prices (May-16) settled up on the week on Tuesday at $322.30/t, an increase of $5.69. In contrast, May-16 Paris rapeseed futures prices closed down on the week. Similar to cereals, the raft of releases published by the USDA supported US soyabean prices. The releases revealed a downward revision to the US soyabean harvest area with a knock on effect on total global soyabean production. Preliminary trade data from Chinese customs revealed that December soyabean imports took 2015 purchases of the commodity to an all-time high of 81.69Mt, up 14% on 2014. The latest data release may help to partly ease concerns about Chinese demand in global agricultural markets. January UK rapemeal (34%, ex-mill, Erith) was at £151/t while Brazilian soyameal (48% ex-store, Liverpool) was at £260/t on Friday (8 Jan). Hi-pro (ex-store, East Coast) soyameal was at £244/t for May delivery on Friday. Price comparisons with the previous week are not available.

Global meat prices still falling

Latest figures from the UN FAO show that global meat prices fell 2% in December, to end 2015 at their lowest point since early 2010. On average, meat prices during 2015 were 15% lower than in 2014 and by December the annual gap was even larger, with the latest quote 23% down on December 2014. Prices for all the main categories of meat fell during December, although poultry meat was the least affected. Reduced import demand for beef from the US has intensified competition on other markets, as well as affecting prices for other meats in the US, including pork. In addition, pig meat prices fell in the EU, due to high production levels relative to demand.

The fall in meat prices was replicated for most other agricultural commodities, with FAO’s food price index reaching its lowest level since April 2009. In real terms, food prices are now the lowest they have been for more than nine years. Cereals prices were also at a 5-year low in December, while dairy and oils were only marginally above recent multi-year lows. Although factors vary between categories, all face a combination of abundant supplies, timid world demand, weak commodity prices and an appreciating US dollar.

International production costs report out now

The 2014 edition of AHDB Pork's report on pig production costs in selected countries is out now. As in previous years, the report covers all the major EU pig producing countries, along with Brazil, Canada and the US. It is based on figures collected and analysed by InterPIG, a group of pig economists from each of the countries covered. As well as total cost estimates, the report compares the physical performance of pig herds and looks at other factors influencing costs.

DOWNLOAD REPORT:- Download this report here

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