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AHDB Pig Market Weekly

11 July 2016

AHDB Pig Market Weekly - 11 July 2016AHDB Pig Market Weekly - 11 July 2016


EU pig prices surge past UK prices

The surge in EU pig prices which began at the end of April continues unabated. This took it to over €155 per 100kg for week ended 26 June, the highest level since September 2014. The EU average reference price increased by nearly €28 per 100kg over that period and by €14 in the latest four weeks. The price has now moved back above year earlier levels, the first time there has been a significant year-on-year rise since 2013.

The stronger market is being driven by a combination of supply and demand factors. There are reports of tighter supplies in several Member States, which have occurred earlier than previously forecast. At the same time, domestic demand has been boosted by the onset of the barbecue season in northern Europe and the tourist season further south. More holidaymakers are reportedly choosing to stay in Europe this year, rather than risk venturing further afield to North Africa or Turkey. Export demand, particularly from China, also remains at record levels.

All of the EU’s major producers have benefitted from the rising market. In the latest four weeks, the sharpest rises were recorded in the Netherlands and Spain, both of which saw rises of €19 per 100kg. The German reference price rose by €13 during the same period, as did the French price, while the Danish quote was up by €11. Ireland recorded a more modest €5 rise.

The upward momentum of the EU market meant that the EU average price moved above the UK reference price in the latest week, for the first time since August 2013. It is worth noting that this was the week before the EU referendum result was announced. Since then, the value of the pound has decreased, so the sterling value of EU prices will have risen further. Based on the exchange rate as at mid-morning on Tuesday 5 July, the EU average price for week ended 26 June would have equated to over 130p/kg, nearly 10p higher than the UK reference price.

German pig herd continuing to decline

Provisional figures from the May pig census show that the number of pigs in Germany fell by 4% since May 2015, to 27 million head. These were the lowest levels in the last five years. Declines were recorded across the board, with breeding sows experiencing the sharpest fall, of 6%. Within this, in-pig sow volumes were down 6%, and in-pig gilts and maiden gilts both back 5%. These figures show that the breeding herd is in decline, and may continue in that trend for the short term. This, in turn, will tighten pig meat supplies later in the year. This tightening of supplies has already been a factor in supporting the German pig price, with the current reference price standing at €161.53/100kg, which is €34/100kg above the lowest level recorded in March.

The impact of the breeding herd reduction was felt with a reduction in the numbers of young pigs and slaughter pigs, down 5% and 4% respectively. Numbers of piglets were also down 3%. This should result in a decline in production levels, as fewer pigs are available to come forward for slaughter.
The census also indicates that the decline in the number of pig farms continued into 2016. The total number of German farms keeping pigs fell by 5% to 24,500, with breeding farms declining more sharply, by 9% to 9,000.

UK pig prices

The EU-spec SPP climbed for the 13th consecutive week in week ending 2 July, by over 1.5p to 123.77/kg. The current quote takes prices back up to levels last seen in late December 2015. Likewise, the SPP is narrowing in on the same point last year, standing now at 9p lower. Although prices have risen once again, helped by strong EU prices, the structure of the UK pig market means that the full effect of the recent currency movements are yet to be reflected in the SPP.

Estimated slaughterings rose by 2% on the previous week to 165,600 head. Nonetheless, they were 6% down on the same point last year, reiterating the point that demand is somewhat ahead of supply once again. The average carcase weight increased slightly on the week by 0.19kg to 81.73kg, which is 1.42kg heavier than the same point last year.

The EU-spec APP rose once again in week ended 25 June, albeit by a lesser amount than previous weeks, by 0.61p 125.62p/kg. The gap between the SPP and the APP remains at around 3.5p as both price series increased at a similar rate in week ended 25 June.

Diverging price trends were recorded for the two weaner categories in week ended 2 July. 30kg weaners recorded an increase of 86p at £41.28 per head, the highest price since mid-December. Nonetheless, 7kg weaners recorded a slight decrease on the week of 30p at £30.18/head but this is still the second highest price (recorded since the start of the year. Both 7kg and 30kg weaners remain below the level recorded last year, by between £2 and £3 per head.

UK exit from the EU - Article 50 and negotiating a new relationship

In the wake of the EU referendum on Thursday 24 June, AHDB will be assessing the evidence and looking at possible scenarios for the UK agricultural sector. Much will depend on the terms of exit that are negotiated and, at present, many issues are unclear. In the meantime, the UK remains a full member of the EU. This means the UK continues to be bound by existing rules and regulations and the free trading relationship with the EU will remain in place.

There has been much discussion about Article 50 and the negotiations but what do we know in these important areas? AHDB has published a quick guide to the process and what we know about how it will work, which can be found by clicking here.

2016: The year so far for retail sales of meat

Now that we are almost halfway through 2016, it is possible to take a look back at the year so far and see what trends have been emerging in the retail market for different proteins. Performance has been varied across the different meats and a clear difference can be seen between primary meat cuts and pre-prepared chilled convenience products.

Italian pork imports decreasing

Italian pork imports decreased by 7% in the first quarter of 2016, when compared with the same period a year earlier, according to the latest data released from Istat. Volumes fell to 251 thousand tonnes and the value of these imports fell during this period, down 15% to €407million, with the average unit price down 9%.

Shipments from Germany, which accounted for more than a third of total volumes, were down 2%, and Danish imports were back by 17%. However, imports from Spain and the Netherlands were up 6% and 11% respectively.

Despite a fall in shipments of fresh/frozen pork to Italy, imports of live pigs in the first quarter increased by 26%, to 428 thousand head. This was driven by a significant increase in Danish imports, which were up 31%, and accounted for almost half of all live pig imports to Italy. Spanish shipments also recorded substantial growth, albeit in smaller numbers, and were up 82% on the same period a year earlier.
Italian pork export volumes are much lower than imports, at 17.4 thousand tonnes in Q1. This was still an increase of 17% on Q1 2015. Although smaller in volumes, exports of processed pork continued to show strong growth. Shipments were up 12% on the year earlier, fuelled by increased exports to Spain, France and Germany.

Dutch exports down in the first quarter

Export volumes of fresh/frozen pork from the Netherlands were down in the first quarter of 2016, by 8%, to 185 thousand tonnes. A reduction in shipment volumes to Germany, back 31%, was a driving force behind this movement. Export volumes were increased to Italy and Greece, by 3% and 22% respectively. Shipments to China increased five-fold in Q1 versus the same period a year earlier. While export volumes were back 8% in Q1, the value of these exports was only down 4%. The average unit price in Germany and China increased versus the same period a year earlier, by 16% and 2%.

While export volumes of fresh/frozen pork to Germany were down, exports of live pigs to Germany were up 33% in Q1, and accounted for three quarters of the total 1.25 million head of live pigs exported from the Netherlands during this period. With the German pig herd declining, demand for live pigs for finishing and processing in Germany has increased.

Although export volumes far exceeded import volumes in Q1, import volumes were still back in this period when compared with the year earlier. Shipments from Germany and Belgium were down 7% and 33% respectively, and Germany accounted for almost two-thirds of all Dutch imports. Albeit from a smaller base, import volumes increased from both France (9%) and Denmark (43%).

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