United Kingdom Pig Meat Market Update

UK and European Producer Prices

• UK pig prices continued to trend upwards in May. In the week ended 24 May, the DAPP was 123.8p/kg dw, 4.9p more than four weeks earlier and 15.4p higher than a year ago. Prices are currently at their highest since July 2007. UK producer prices in 2008 have benefited from the weaker value of sterling against the Euro, relatively strong consumer demand for pig meat in the first quarter and tighter supplies in April and May.

• Cull sow prices have increased particularly sharply, and are also at an 11-year high. The average price in the week ended 24 May was 98p/kg dw, 8p more than four weeks earlier and 36p above the level of a year earlier. Nearly all sow meat produced in the United Kingdom is exported, and sow prices have therefore got a major boost from the depreciation of sterling. However, the further increase in May was mainly due to tighter sow meat supplies compared with earlier in the year.
  
  
• Economic concerns about the UK economy, together with a spill-over effect from the general weakness of the US dollar, have pushed sterling sharply lower against the Euro over the past few months. In May, the Euro was worth an average 79p, compared with 68p a year earlier. The weakening in the value of sterling will have made UK imports dearer and exports more competitive.
  
  
• Producer prices have increased more in many Continental EU countries than in the United Kingdom. Lower slaughterings in a number of countries are supporting market price levels. The arrival of warmer weather in Europe also prompted the beginning of the barbecue season in May.
  
  
• The EU-27 average reference price in the week ended 25 May was nine per cent higher than four weeks earlier. Spanish prices were unchanged but there were increases in all the other major producing countries. Prices in Germany, Hungary, Italy, the Netherlands and Poland all increased by between 14 and 17 per cent over the four-week period. The EU-27 price was 18 per cent higher than a year earlier in Euro terms but 38 per cent higher in sterling terms.
  
  
• Relatively stronger EU prices have led to the disappearance of the UK premium over the EU-27 price in recent months. The premium, which averaged 12p/kg in 2007, disappeared in March. At the end of April, the UK reference price averaged 3p less than the EU-27 price. UK prices averaged 13.9p more than Danish prices (averaged 24.0p in 2007) and just 2.9p more than the Dutch price (19.8p in 2007).

Russian Meat Ban

At the end of April, Russia banned imports of meat from a number of EU meat plants. The reason given was the presence of residues from the antibiotics doxicyclin and tetracycline, which Russia does not allow. Over 30 establishments in the EU are now affected, mostly producing pig and poultry meat. Imports from some companies in the United States, Canada, Brazil and Argentina have also been banned indefinitely. In 2007 the EU exported 233,000 tonnes of fresh and frozen pork to Russia.

UK Slaughterings and Production

• In the first four months of 2008, total clean pig slaughterings were two per cent higher than a year earlier, due to a combination of continuing improvements in sow productivity and, in January, the clearing of the backlog following foot and mouth disease (FMD). Provisional forecasts for May, however, suggest a fractional decline in total slaughterings
  
  
• Since April, average weekly throughputs have tended to move lower. This trend is likely to continue into the second half of 2008 due to the impact of the decline in the national breeding herd since June 2007.

• Sow cullings have been at high levels this year, a strong indication that the June 2008 livestock survey will record a further contraction in breeding sow numbers. High feed costs and industry losses are the prime drivers of these trends. In January-March 2008, sow cullings totalled 37 per cent more than in the first quarter of 2007. The increase would have been even more, had it not been for the early Easter. Cullings moved lower in April and May, although they were still running above 2007 levels.

Feed Prices

• Delivered feed wheat prices have fallen by around £30/tonne since the end of March to average £152 in the week ended 24 May. However this is still 50 per cent higher than a year ago. Wheat futures prices for November have also moved down to £138, reflecting the downward trend in international new crop wheat values. This movement has been on the back of healthy world wheat production estimates from the USDA. The USDA is estimating production of 650 million tonnes in 2008/09, up 50 million tonnes from the current 2007/08 estimate.
  
  
• UK soyameal prices have stabilised in recent weeks at around £300.tonne, but are still almost double what they were a year ago. Uncertainty over the size of the US soyabean plantings this year and concern over adequate supplies in 2008/09 have resulted in volatility in soyabean futures market prices.

Consumption

• TNS data for the most recent four-week period (ended 18 May) indicate a decline in retail pork purchases of three per cent in volume terms compared with a year earlier, in contrast to the first quarter when purchases had been growing strongly. Pork prices, in common with other meats, are currently showing sharp increases compared with last year. Consequently, expenditure was up eight per cent.
  
  
• Purchases of belly, which grew strongly last year, have continued to move higher in 2008. In the latest four-week period, they grew by 11 per cent . However, sales of chops fell sharply (-16%) and total roasts were also lower (-3%).
  
  
• Bacon purchases declined by four per cent in volume terms in the four-week period, but a 10 per cent increase in average retail prices meant that expenditure was six per cent higher. British bacon’s share of the market increased was little changed at 31 per cent.