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AHDB Pig Market Weekly

28 June 2016

AHDB Pig Market Weekly - 27 June 2016AHDB Pig Market Weekly - 27 June 2016


UK production starting to stabilise

According to the latest DEFRA figures, pig slaughterings for May were up, to 863 thousand head, on the same period a year earlier. However, if you allow for a change in reporting periods, the latest figure actually represents a 0.5% fall in slaughtering levels on May 2015. This decline in slaughterings may start to provide a tightening of supplies, which will further support the UK pig price, which has been slowly recovering since April.

In addition to fewer pigs coming forward to slaughter, the average carcase weight fell in May, to 81.3kg. This is the first time this year that the average carcase weight has fallen below 82kg, and is now at similar levels to May 2015, only 0.1kg heavier.

Sow slaughterings continued to be ahead of 2015 levels, 4% more than the adjusted figure, at 20,700 head. This continues the trend that has been recorded in 2016 to date, supporting the expectation of a contraction in the breeding herd, resulting in a tightening of supplies in the future. Some of this tightening may already be being experienced, with adjusted production levels down modestly by 0.3% in May, on the same period a year earlier.

EU exports continue their strong start to the year

EU exports of fresh/frozen pork continued to show strong growth into April. Shipments were up 86% on the same period a year earlier, to 227 thousand tonnes. Exports to China from all the main producing member states have seen record growth, with shipments more than trebled in April 2016 versus the year earlier. All other Asian markets took more EU pork in April, with shipments to Hong Kong and Vietnam more than doubling on April 2015.

Value growth was only slightly behind volume growth, up 68% to €477 million in April versus a year earlier. Unit prices were 10% down on April 2015 levels, with decreases recorded in the unit price for South Korea and the United States. However, an increase in the average unit price of 5% in China has helped contribute to much of the value growth.

Other pig products also recorded this positive growth trend. Offal exports were up 40% in April on the year earlier, with the Asian markets providing most of this growth. The value of offal exports grew ahead of volume, up 50% in April, buoyed by the strong unit price in China.

The United States, Canada and Brazil have increased their export volumes to China substantially year-on-year, as the Chinese authorities have approved more plants. Therefore, while the EU is capitalising on the growing Chinese demand, as are other major global producers, thereby increasing the competition.

UK pig prices

The EU-spec SPP continued its positive trend in the week ending 18 June, recording an increase of 1.13p to 121.53p/kg. This is now the eleventh consecutive week of growth, and returns the SPP to levels last seen at the end of last year. However, the SPP is still almost 11p behind the price at this week a year ago. The increasing EU pig price is continuing to support the UK price, and higher value Chinese exports show little sign of slowing, again assisting in buoying the UK price. Estimated slaughterings largely stood on from the previous week, only recording a 0.4% increase to 166.5 thousand head. They also recorded a 5% decrease in slaughtering volumes from this week a year ago, supporting anecdotal evidence that supplies are tightening. This was coupled with another fall in the average carcase weight, down 0.17kg to 81.66kg, on the week earlier.

In the week ending 11 June, the EU-spec APP recorded further increases of 1.35p to 124.01p/kg, and is the highest price since the beginning of the year. This increase has resulted in the gap between the APP and the SPP remaining at 3.6p

Both 30kg and 7kg weaners recorded price increases. 30kg weaners increased a modest £0.05 to £40.45 in week ending 18 June, while 7kg weaners experienced a £0.24 increase to £30.09. This is the first time 7kg weaners have breached the £30 mark since the end of January, and while increasing prices may suggest a stronger confidence in the longer-term finishing market, it is still somewhat tentative.

Danish pork exports record slight decline

Danish pork exports for the first quarter of 2016 recorded a slight decline, down 6% to 273 thousand tonnes on the same period a year earlier. At the same time, the value of these exports fell by just under 9%, to €528 million. This was due to the average price falling by just under 3%. The EU remained the largest market for Danish exports, and a 14% fall in export volumes here assisted in bringing down the overall export levels. Only exports to the UK recorded a rise, up 1%, while shipment levels to Germany, Poland and Italy fell by 14%, 11% and 19% respectively.

Exports to non-EU markets grew in the first quarter of 2016 versus the year earlier, up 15% to 87 thousand tonnes. This growth was predominantly due to shipment levels to China more than doubling in that period. Japanese shipments also recorded a modest growth, while exports to Australia and the United States both recorded a 4% decrease on 2015 levels.

Danish live pig exports fell back slightly in the first quarter of 2016, by 2% to 3.1 million head. 9% fewer pigs were shipped to Germany, while Polish levels remained largely static. The introduction of the Country of Origin Labelling (COOL) regulations in the EU in April 2015 may have had an effect on the volume of live trade.

Organic pig numbers rise slightly

Latest figures from Defra show a small rise in the number of organically farmed pigs in the UK in 2015, for the first time since 2011. Nevertheless, at 30,000 head, the organic pig herd remains the second lowest in records back to 2003 and less than half its size at the peak in 2008. Organic pigs continue to make up less than 1% of the national herd. Latest data from the EU show that the UK’s organic pig herd was the seventh largest in the EU in 2014 but was much smaller than the herds in Denmark, France and Germany. Each of these numbered around 200,000 head and between them accounted for over two-thirds of the EU’s organic pigs.

The reversal of fortunes for organic pigs was also reflected for poultry, although, as with pigs, numbers remain well down on the mid-2000s. The number of organic cattle and sheep, however, fell further. This downward trend was also apparent in the amount of land with organic status, which reduced for the seventh year in a row, to just over 500,000 hectares. There was also little sign of an upturn in the low area of land in conversion to organic. Most organic land is used as permanent or temporary pasture, including rough grazing.

Growing presence of Poland on UK market

Poland has been steadily increasing its presence on the UK pig meat market, which seems set to continue. There has been steady growth in imports of processed products, including sausages, and more recently for fresh pork for further processing.

Sterling volatility continues

The value of sterling has remained volatile of late and this week recorded the largest gain against the euro for the previous five months. As this may increase the export price of UK pork and make imports cheaper, if the strengthening trend continues, it could potentially harm volumes of imports and exports. However, currency volatility looks set to continue for the near future, so below we set out the trading range of sterling since the financial crisis of 2008, against how these levels affect the EU pig price in sterling terms.

This gives a guide as to the impact that exchange rates can have on pig prices in the UK, given that the level of EU prices is a key determinant of competitiveness. At its current level, the EU pig price would vary by over 40p/kg in sterling terms, taking the strongest value of sterling and comparing it to the weakest, since 2008.

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