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AHDB Pig Market Weekly


22 February 2013

AHDB Pig Market Weekly - 21 February 2013AHDB Pig Market Weekly - 21 February 2013

The AHDB Outlook Conference, delivered on behalf of EBLEX, DairyCo and BPEX, took place in London on Wednesday 13th February.

AHDB

Outlook Conference Review

With over 150 delegates, the conference focused on aspects of the markets that are likely to be important to businesses over the next 6-18 months. The first keynote speaker was Mark Berrisford-Smith, Head of Economics at HSBC Commercial Banking. Mark’s presentation focused on the outlook for the UK and global economy over the coming months. The second keynote speaker was Jack Watts, Senior Analyst in AHDB Market Intelligence, who provided an outlook for feed markets along with some thoughts on the role of speculators and risk management.

The second half of the conference consisted of three separate sessions presenting the outlook for different livestock sectors. As well as the outlook for UK supplies, covered in last week’s edition of Pig Market Weekly, the pig breakout session also included a presentation by Albert Vernooij of Rabobank on the EU and global situation.

Census Figures Confirm Decline in EU Breeding Herd

Eurostat have now published pig census figures from 19 Member States which between them account for over 80% of the EU breeding herd. In most cases, the census was taken in November or December 2012. The figures show that over the previous year, the EU breeding herd declined by over 4%. There was a smaller fall in in-pig sows and gilts, down 3.5% and 1.4% respectively. However, maiden gilt numbers were down 5%, suggesting no recovery in herd numbers is imminent. Only one country, Slovakia, recorded an increase in its breeding herd, while the Czech herd was stable. Elsewhere, declines ranged from 1% in Denmark to 21% in Slovenia.

Annual Change in Pig and Sow Numbers in Selected EU Member States, December 2011 - 2012

Source: Eurostat

The figures also show that the overall pig herd in the 19 countries was down by nearly 2%. The fall would have been even larger but for changes in the methodology of the German census which significantly increased the number of pigs recorded. Other than Germany, only a few smaller producers recorded increased herd numbers. Meanwhile, three Eastern Member States, including Poland, recorded double digit percentage falls. The contraction in the EU herd confirms that pig supplies are likely to be tight through 2013, particularly in the second half of the year.

US Pork Exports Hit New Record in 2012

In 2012, the US export market made further improvements, exporting 6% more pork compared with the year before. This rise resulted from a consistent increase in shipments during the first three quarters of the year. However, between October and December, US exports contracted by 7% compared with a year earlier. Shipments to the major Asian markets were considerably down on the year. Demand from the leading buyer, Japan, was 9% lower, partly a result of a recovery in their domestic pig market after the FMD outbreak and natural disasters in earlier years. Exports to China and South Korea were also down by 9% and 11% respectively, with the former largely due to a sharp drop in the final quarter.

US Pork Exports, January - December

Source: US Department of Commerce, GTIS

In contrast to the Asian markets, shipments to other key buyers increased. Volumes sent to Mexico were 43% higher while the Canadian market purchased 8% more. Similarly, demand from Russia was higher by as much as 41%, as the US benefitted from the supply shortage created by the Russian Ban on Brazilian products. However, this market is now under threat, with Russia banning imports of US meat from mid February, due to contamination with Ractopamine. Latest USDA forecasts suggest that, despite this, overall US pork exports will remain at similar levels in 2013.

UK Pig Prices

For the week ended 16th February, the EU-spec DAPP fell for the fifth week running. At 155.99p per kg, the pig price was just over a penny lower than a week earlier. Despite some signs that the market is moving towards a more balanced situation, the DAPP continued to follow the declining trend that normally occurs at this time of year. However, prices remained 16p above the 2012 level for the same week in spite of pig supplies remaining plentiful. Throughputs for the week were estimated to be 13,000 head more than in the corresponding week in 2012. The average carcase weight for the week ended 16 February was almost unchanged at 80.19kg.

GB Finished Pig Prices (DAPP)

Source: AHDB Market Intelligence

The weaner market has struggled to pick up since the start of December and for the week ending 23 February, the latest quote was again steady at £46.39 per head. Although the price may not reflect any further growth in confidence, at this price the weaner market is in a better position compared with the corresponding week in 2012.

In contrast, the sow price picked up slightly in the week ended 9 February, reaching 95.23p per kg. This was just over a penny higher than the week before, with exchange rate movements contributing to the rise, adding to a stronger continental market. However, the sow market performance was still weaker than a year earlier, as producers were paid on average 15p less. This came on the back of higher supplies, with the latest estimate for sow slaughterings for the year to date up 2% in the UK and 8% in Germany, the main export destination.

EU Pork Exports Higher in December

For the first time since May, EU pork exports were higher than a year earlier in December 2012. Nevertheless, the volume shipped, 127,000 tonnes, was the lowest monthly figure since June. The year-on-year growth was largely the result of a doubling of shipments to China. As a result of the December increase, shipments for the year as a whole were 1% higher than in 2011. China was again the key to this growth, with Belarus, Ukraine and Australia the other major growth markets during the year. In contrast, shipments to Russia, South Korea and Hong Kong all suffered double-digit percentage declines. EU pork imports in 2012 were almost unchanged from the previous year at 14,000 tonnes, around half being sourced from Chile.

EU Pig Meat Exports

Source: Eurostat, GTIS

Pig offal exports were also up on the year in December. Falling shipments to Russia and other minor markets failed to fully offset growth of 20% in the main markets of China/Hong Kong. Nevertheless, the volume of pig offal traded across the full year was slightly lower than in 2011; the increase in shipments to China was counteracted by a similar fall in exports to Hong Kong. For the year as a whole, exports of other pig meat products were up slightly. Cured pig meat volumes were up 2% at 37,000 tonnes, sausage shipments were up 4% at 131,000 tonnes and other processed products were up 1% at 72,000 tonnes.

World Bank Revises Global Growth Forecast Down

In its latest forecast, the World Bank has revised down its previous estimate for world growth in 2013. The January 2013 Global Economic Prospects report forecasts the global economy to grow at 2.4% this year, down from the 3.0% forecast last June. This is as a result of slower-than-expected recovery and a resurgence of turmoil in May-June 2012 in high-income countries, with particular concern about the sustainability of the euro. Prospects are for a modest acceleration in global growth in the medium term, though the economic environment remains fragile. Global growth is expected to strengthen to 3.1% and 3.3% in 2014 and 2015 respectively.

Economic growth in the euro area, however, is expected to remain below that of the global economy. Financial markets have improved as a result of national and EU-wide measures to improve fiscal sustainability, as well as a series of measures taken by the European Central Bank to defend the euro. Nevertheless, economic recovery remains weak and confidence in the business sector remains low. Growth in the euro area is only projected to return to positive figures in 2014, with GDP expected to contract by 0.1% in 2013, before slowly increasing by 0.9% in 2014 and 1.4% in 2015.

French Pork Exports Down, Imports up in 2012

During 2012, French pig meat production was down around 2%. As a result, the supplies available for export were lower, leading to 3% fall in volumes for the year as a whole. The fall was sharpest in the third quarter, when supplies were at their tightest, and fourth quarter shipments were actually slightly higher than in 2011. For the full year, exports to other EU Member States were up a little, despite falls in volumes sent to the four largest markets – Italy, the UK, Greece and Spain – all of which were facing difficult economic conditions. Instead, growth came from markets to the North and East of France, notably Belgium, Germany and Poland. Shipments to non-EU markets fell, against the trend for much of the EU, with Russia, China and South Korea all taking less French pork.

French Pork Trade, January-December

Source: DNSCE, GTIS

The tight supply situation in France also led to a small increase in pork imports, which were up by 3%. Over 70% was sourced from Spain, which shipped 6% more on the back of increased production. Imports of cured products, mostly ham from Italy, Spain and Germany, were up 3%, while sausage imports were up 25%, with Germany the leading supplier. Exports of live pigs, mainly slaughter pigs, fell marginally to 645,000 head, their lowest level since 2005. Live imports were down 12% at 225,000 head.

Feed Market Update

Feed wheat prices closed on Tuesday slightly higher than a week earlier, largely as a result of further weakening of the pound. Price falls in the early part of last week, due to further rainfall in the US, were offset by rises later in the week on increased buying of US wheat by Brazil and China. Chicago soyabean futures were slightly firmer than a week ago, with dryness in Argentina continuing to cause concern. Nevertheless, the Brazilian harvest is progressing well, although nearly 60% of the anticipated crop has already been sold.

Small Increase in Canadian Exports

The Canadian pork export trade edged up 4% in 2012, with around 32,900 tonnes more shipped compared with the year before. The US remained the primary market and exports to the country were almost in line with volumes recorded in 2011. However, while overall trade patterns in the final quarter were similar to the year as a whole, shipments to the US were 4% down on the year. Russia on the other hand increased its significance to Canadian exporters, accepting just over 46% more pork across the whole year than in 2011. This was largely a function of the Russian ban on meat from three Brazilian states, which created an opportunity for Canada, especially during the first half of 2012.

Canadian Exports, January - December

Source: Statistics Canada

Beyond the two leading markets, there were contrasting trends in shipments to Far Eastern markets. There was 13% more pork exported to China. In contrast, demand from Japan declined by 8% and shipments to South Korea were down by a third. For the year as a whole, the total value of Canadian exports was marginally lower than in 2011 on the back of lower domestic prices. Final quarter figures showed a steeper decline in value in Canadian dollar terms. With domestic production little changed, the higher exports created more demand for imports which were up 13% at 139,000 tonnes, mostly sourced from the US.

 

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