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AHDB Pork Weekly Export Bulletin

11 April 2016

AHDB Pig Market Weekly - 11 April 2016AHDB Pig Market Weekly - 11 April 2016

British Pig Executive Weekly Export Bulletin

More pork sold in February

In the 4 weeks to 28 February 2016, volume sales of fresh/frozen pork increased by 3% on the same period a year earlier, according to data from Kantar Worldpanel. However, over the same time period, the amount spent on purchasing pork reduced by 5%. Value sales are down despite increased volume sales as retail prices fell by 8% year-on-year. It is still encouraging to report an increase in volume sales of pork, however, as this has been a declining market for over a year. Nevertheless, taking a longer-term perspective, the amount of pork sold in the 12 weeks ending 28 February was still 2% lower than a year before.

Pork roasting joints saw a significant increase in volume sales in the 4 weeks to 28 February, with loin and shoulder joints up by 19% and 17% respectively, on a year earlier. This time period would capture the start of the latest AHDB Pulled Pork campaign, so there is an inference that this may have had a positive impact on sales of shoulder roasting joints and could have helped other roasting joints too. More detailed analysis of the impact of the Pulled Pork campaign will be available in due course.

Pork chilled main meal accompaniments, which include some pulled pork products, also recorded an increase in volume sales over the same time period of 48%, albeit from a relatively small base. However, bacon, sausages and sliced cooked meats all recorded volume sale decreases in both the 12-week and 4-week periods to 28 February. Prices paid for all pork products, with the exception of belly, ribs and marinades, were cheaper than a year before during the latest period, reflecting the deflationary price experienced in the pork market.

Poland increases role in trade within EU

Analysis of trade figures shows little change in the volume of pork traded between the 28 EU Member States in 2015. The precise trend is unclear due to some inconsistencies between data from different countries. Export figures show a 4% rise in the amount traded, in line with the rise in production during the year, but import figures show a small fall. Either way, around 5.5 million tonnes of pork moved between EU countries during the year, nearly a quarter of total EU production (and roughly the same as the annual output of Germany, the EU’s largest pork producer). Almost 90% of shipments came from the seven largest exporters. Germany remained comfortably the leading seller to other Member States, as well as being the second largest importer. This confirms its central position in the EU pig market.

One country which has increased in prominence within the EU trade over the last year is Poland. Its imports were up 9%, while exports to other Member States rose by 18%, moving it ahead of France in the export league table. In part, this is because of the loss of non-EU export markets following the ASF outbreaks in the country, meaning it has had to find markets within Europe. Last year, 83% of Polish exports went to other EU countries, compared with little over half two years earlier, before the ASF cases. It sold more pork to most of the EU’s importers, including the UK, which took around 6,000 tonnes more Polish pork than in 2014.

UK pig prices

The EU-spec SPP fell modestly in the week ending 2 April 2016 by 0.26p to 112.55p/kg. This movement wasn’t entirely unexpected, with both the short working week due to the Easter holidays and the significant price increase the previous week probably contributing to this downwards movement. Going forwards, there are now a few consecutive weeks with no holidays, so one would hope to see any effect from this on pig prices mitigated in the short term.

The average carcase weight increased slightly to 83.74kg in the week ending 2 April. This was up 0.4kg on the previous week, maintaining the plus 83kg threshold that has been recorded throughout 2016 to date. Estimated slaughterings were up 5%, to 167,000 head, and 6% on the same week of last year which was also a short working week. However, the volumes in the last two weeks have been lower than those recorded earlier in the year due to them being short working weeks.

The EU-spec APP also fell back in the week ending 26 March 2016, by 0.20p to 116.04p/kg, reducing the gap between the APP and SPP to 3.23p, the lowest since January 2015. This infers that either fewer premium pigs came forwards that week, or the premiums being paid for these pigs have reduced.

Both 30kg and 7kg weaners recorded price decreases in the week ending 2 April. 30kg weaners fell by £1.10 to £35.86 a head and 7kg weaners fell by a more modest £0.18 to £28.64 a head. The 30kg price fall was largely influenced by very low volumes being recorded and the mix of companies reporting, rather than actual price changes. The 7kg weaner price was influenced by one supplier buying a lot of spot pigs at a low price, rather than on contract.

Little sign of Chinese market slowdown

Latest reports from China suggest that pig prices remain high and there is little sign of demand for imported pork slowing down. The high price level is evidenced by wholesale pork prices, which tend to track pig prices closely. Over the last couple of months, these have fluctuated around 25 yuan/kg (£2.70/kg) and, if anything, have been increasing further in the latest weeks. This would translate into a liveweight pig price of around £2/kg. Prices are now almost 50% higher than a year ago, when they reached a low point of around 17 yuan/kg. Latest figures suggest that, despite the recovery in prices, Chinese sow numbers continue to fall, as many small farmers have stopped production and are reluctant to restart.

The situation in the Chinese market suggests that demand for imports will remain strong for some time to come. Certainly, shipments have started the year strongly, with volumes in the first two months of 2016 up by more than three-quarters compared with the same period last year. Imports from the EU almost doubled, while the unit value has held up well in euro terms, being 1% higher than a year earlier, at €1.72 per kg. This will be encouraging for EU exporters, including those from the UK, given how important Chinese demand has become since the Russian import ban.

Sterling hits near 18-month low against the euro

With the EU referendum now announced to be taking place on 23 June, sterling has fallen against a number of currencies. On Friday, the pound hit its lowest level against the euro since November 2014 at £1=€1.25, adding further to losses made since the start of the year. Since the beginning of 2016 the pound has fallen 8% against the euro. The fall in sterling is said to be partly in response to the period of uncertainty faced by business and financial markets between now and 23 June. In addition to the pound weakening against the euro, it also hit a seven year low against the US dollar on 29 February. Since then, sterling has strengthened slightly against the dollar but is still residing at levels last seen in May 2010.

The weaker pound against the euro will make UK pig meat more competitive in euro-priced markets. This could, therefore, encourage increased demand for UK products. Last year the strength of the pound against the euro was driving UK pig prices down. In August, it hit a near eight-year high against the euro at £1=€1.44. In 2015, the gap between the EU pig price and the UK pig price averaged 29p/kg. The weaker pound, combined with the UK pig price slipping since the start of 2016, while the EU reference price remained relatively stable, means the difference between the EU and UK pig price has narrowed to under 10p/kg in the latest week. This all means that, although pig prices are currently close to multi-year lows, the weaker sterling in comparison to last year could give UK pig producers a bit of hope that they may strengthen in the coming months.

Feed market update

UK feed wheat futures prices (May-16) closed marginally up (£0.45/t) on the week on Tuesday, at £106.45/t. Nevertheless, Paris wheat futures prices (May-16) recorded a decline week on week. The diverging trends recorded in European markets over the last week have been partly influenced by currency movements. Sterling has slipped to a near 18 month low against the euro, which has helped to protect UK prices somewhat, while the euro has strengthened against the US dollar. Chicago wheat futures prices recorded a slight decline Tuesday to Tuesday while Chicago maize recorded a larger decline, partially due to the results of the USDA’s reports on stocks and prospective plantings, released last week. New crop developments dominated headlines last week and again this week. Alongside the USDA reports released last week, on Tuesday the USDA released its first crop conditions report of 2016. The report recorded 59% of winter wheat as in good or excellent condition.

Similar to grains, the oilseed market was influenced last week by the anticipation and then the release of the USDA stocks and prospective plantings reports. Despite Chicago soyabean futures closing up on Friday in response the USDA reports, the May-16 contract closed down week on week on Tuesday. Nevertheless, May-16 Paris rapeseed futures settled slightly up. UK rapemeal price (34%, ex-mill, Erith) for May delivery was £150/t as at Friday 1 April , a decrease of £9 from the previous week. Brazilian soyameal (48%, ex-store, Liverpool) for May delivery was at £254/t on Friday. European rapeseed crops were reported to be in good condition as of 24 March, according to Strategie Grains' latest oilseeds report. Rapeseed yields and production could be looking promising but weather conditions during the flowering stage are crucial to determine full potential.

Agricultural Markets Task Force

Through 2016, the EU Commission’s Agricultural Markets Task Force (AMTF) will be convening with a view of improving the position of farmers in the food chain. The first area to be covered was that of market transparency. AHDB‘s submission to this can be found here. The final report of the AMTF is expected to be published in the autumn and AHDB will continue to contribute as part of its work on volatility.

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