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AHDB Pig Market Weekly

31 May 2016

AHDB Pig Market Weekly - 31 May 2016AHDB Pig Market Weekly - 31 May 2016


Pig supplies remain plentiful in April

At 893,800 head, pig slaughterings in April remained well above their level in the same month last year, according to latest figures from Defra. Allowing for a change in reporting periods, the latest figure is around 5% higher than in April 2015, although the increase is slightly higher than indicated by other sources, so may be subject to revision. If correct, the rise represents the strongest growth of the year to date and, in this context, it is encouraging that pig prices showed signs of firming during the month.

Adding to supply levels, carcase weights for clean pigs remained well above last year’s level. The average weight during April was 82.3kg, around 600g lighter than in March but 700g heavier than in April 2015. Sow slaughterings also remained inflated, with 22,400 head slaughtered during the month, 12% more than the adjusted figure for a year before. This continues the trend of the year so far and supports the expectation that some contraction in the breeding herd may be continuing. These factors all combined to drive a substantial 6% rise in pig meat production, which totalled 76,800 tonnes during the month.

Strong exports support EU market

EU exports of all pig meat products were up by more than a quarter in the first three months of 2016, compared with a year earlier, according to latest figures from the EU Commission. All the main categories of export were higher, on the back of strong demand from Asian markets, in particular. Fresh/frozen pork exports to China more than doubled, while sales to Hong Kong and the Philippines were both up by a third. Japan and the United States both took around 20% more EU pork than in the same period last year. South Korea was the only major market to take significantly less product this year. Offal sales to the Asian markets were similarly strong. In addition, China bought substantially more pig fat this year which, along with growth to the Philippines, provided some relief to a part of the market which has been struggling since the Russian ban.

All of the EU’s significant exporters experienced year-on-year growth in third country exports during the first quarter of 2016. Spain led the way with shipments up by nearly half, while Germany saw a 31% rise and Denmark’s sales were up 7%. It was a similar story among the EU’s mid-ranking exporters, including the UK, which saw third country volumes rise by more than half, the fastest growth of any Member State.
The strength of export sales in early 2016 helped to provide some support to the EU pig market at a time when consumer demand for pork was subdued. More recent reports suggest that export sales have remained strong, meaning that an upturn in domestic demand has tightened the EU market and pushed pig prices higher. With supplies forecast to reduce later in the year, signs that export demand will remain robust could provide some cautious optimism among EU producers.

UK pig prices

The recent recovery in GB pig prices continued in week ended 21 May, with a rise in the EU-spec SPP of 0.67p to 116.27p/kg. The price has now increased for seven straight weeks, adding nearly 4p over that time, and is at its highest level since mid-January. While this will come as a welcome relief for producers, it is worth remembering that the current price is still around 15p lower than a year before. The increase is being driven by a combination of slightly lower supplies, partly due to carcase weights reaching their lowest level of the year to date, robust demand (notably from export markets) and a strengthening EU market.
Having been slower to pick up than the SPP, the EU-spec APP accelerated in week ended 14 May, rising by 1.34p to 119.05p/kg. This is comfortably the biggest weekly rise recorded since the series was introduced in April 2014. As a result, the gap between APP and SPP widened back to around 3.5p, having narrowed over the previous month.

The GB weaner market remains on the firm side of stability, with the 7kg average virtually unchanged for week ended 21 May, at £29.27 per head (down 6p on the week before). The 30kg price was up £2.26 at £39.22, reversing falls in the two previous weeks and taking the price to its highest level since early January. Although fluctuating somewhat from week to week, both price series have been on an upward trend of late, though, as with finished pig prices, they remain well below year earlier levels.

Economic overview and forecast

With the EU Spring Economic Forecast having been published this month, it is timely to review the economic environment for agriculture and the economic forecast it delivers for the months ahead.
Headlines would indicate that in the EU, the economy continues to expand modestly, while UK growth is projected to slow and inflation to rise in 2016.

Focus on Latin America

Latin American countries have been increasing their pork production over recent years, with certain countries now becoming major players in the global market. There are a couple of countries which are major exporters – Brazil and Chile. While the net importing countries in the region may currently offer limited trade, there are potential opportunities for the future and it would be prudent to explore them further.

Irish exports experience strong growth in Q1

Exports of fresh and frozen pork from Ireland recorded strong growth in the first quarter of 2016, when compared with the same period a year earlier. Volumes grew by 19% to 44.6 thousand tonnes and growth was largely driven by increased shipments to China. It remains the second largest market for Irish pig meat, after the UK. During the first quarter, exports to China grew by 77% to 10.6 thousand tonnes, as Ireland, as with fellow EU member states, capitalised on both growing Chinese demand and the increasing Chinese pig price. Albeit in smaller numbers, exports to Denmark grew significantly, more than doubling compared with Q1 2015. This product is probably intended for re-export, with China the most likely destination.

Import levels decreased modestly in Q1 2016 on the same period a year earlier. While shipment levels from both the UK and Spain were up, by 22% and 49% respectively, decreases in imports from the Netherlands and Denmark subdued overall volumes. Irish producers have been keeping the pressure on major processors against sourcing imported pigment. Coupled with this, the EU/Irish support package for producers has been rolled out, worth £2,600 per herd. These factors might lead to reduced import levels in the future.

EU production growth slowing in February

Provisional figures from the EU Commission show that EU pig meat production increased year-on-year in February – up 6% to 1.95 million tonnes. There was one extra working day this year, due to the leap year, so if working day production was compared like for like, this was equivalent to a rise in production of just 1%. This represents a slowdown in growth compared with much of 2015, which supports forecasts that supplies will begin to tighten throughout the year. Similarly, clean pig slaughterings were up 5% in February on the year earlier, to 21.4 million head but this effectively was only a marginal increase. Major producing member states illustrated in the December censuses that they are rationalising their breeding herds. New figures from Poland suggest this trend has continued since then, with its breeding herd in March 16% smaller than a year before.

There were fluctuations in the outputs from member states in February when compared with a year earlier. Spain led the march, with production volumes up 14% on a year earlier. Following the results from the December census, showing Spain increasing its pig herd, this increase in unsurprising. Germany and France also recorded increases in production, both at 6%. However, Denmark and the Netherlands both recorded falls in production levels (-6% and -10% respectively). This fall was despite the longer working month, so may actually represent a greater fall than recorded, although reporting periods are thought to have changed, for Denmark at least.

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