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AHDB Pig Market Weekly


02 May 2013

AHDB Pig Market Weekly - 2 May 2013AHDB Pig Market Weekly - 2 May 2013


AHDB

Small Fall in UK Pig Meat Production Forecast this Year

Latest AHDB/BPEX forecasts for UK pig meat supplies indicate that clean pig slaughterings are set to be 1% lower in 2013 than they were last year. However, this is expected to be partly offset by higher carcase weights, meaning pig meat production will be only marginally lower. The forecast fall in slaughterings is the result of the decline in the breeding herd recorded in the December census. This will more than offset any further improvements in sow productivity, with the biggest fall expected during the second and third quarter of the year. Carcase weights are expected to remain high as processors look for heavier pigs to offset lower slaughterings.

UK Pig Meat Production and Forecasts

Lower UK production would normally lead to increased pig meat imports to meet consumer demand. However, supplies are likely to be tight across the EU so imports are also set to fall, particularly as the year progresses. At the same time, export demand will remain firm, especially as the UK will have a full year of access to China in 2013. UK exports are, therefore, forecast to be little changed for the year as a whole. As a result of these changes, less pig meat will be available for consumption in the UK, which should mean that prices remain firm.

Modest Growth in Global Production in 2013

According to latest forecasts from USDA, global pig meat production is expected to grow during 2013 but at a slower rate than in 2012. This represents a more positive picture than USDA’s previous forecasts, which indicated that production would be little changed this year. As usual, China is a key driver of the overall trend, given that it accounts for nearly half of the global total. Its production growth was stronger than expected in 2012 as profitability was better than anticipated. However, this has led to lower pig prices and, with feed prices still high, there are increasing signs that this is beginning to hit the breeding herd. As a result, Chinese production growth is expected to be slower this year than it was in 2012.

Global Pig Meat Production

Source: USDA, AHDB

Most other major producing countries are also expected to increase production, although generally only by a small amount as high feed prices are constraining growth. Bigger rises are expected in Russia, where government support is encouraging investment in more modern facilities, and South Korea, where the herd has now largely recovered from the major FMD outbreak two years ago. Other than the EU, Canada is the only other major producer where production is forecast to decline. With production growth generally stronger in importing countries than in exporters, the amount of pig meat traded globally is expected to fall in 2013.

Pig Prices

GB pig prices reached a new record high in week ended 27 April, with the EU-spec DAPP hitting 161.32p per kg, surpassing the previous peak in the week before Christmas 2012. The latest price represented an increase of 0.61p on the previous week and was over 14p higher than a year earlier. Prices have now added around 6p in the last two months, suggesting that there may have been some improvement in demand for British pig meat, given that pigs have remained relatively plentiful and carcase weights are higher than normal at this time of year. Throughputs in April are estimated to be around 1% up on April 2012, while average carcase weights have remained above 79kg; last April average weights were consistently below 79kg.

Average Carcase Weights for GB Finished Pigs

Source: AHDB Market Intelligence

The recent firming of the weaner price continues, with the average price for week ending 4 May hitting £49.56 per head, 39p higher than the previous week and more than £4 up on a year earlier. Strengthening finished pig prices and somewhat lower feed prices contributed to the increase.

With the EU sow trade still stable, there was little movement in the GB cull sow price in week ended 20 April. The average price was down 0.16p at 104.18p per kg. This remained around 18p lower than a year earlier as increased supplies and the subdued EU pig market were keeping a lid on export prices. Partly as a result of the lower prices, GB sow slaughterings so far in April are estimated to be 1% down on April 2012.

Croatia to join EU in July

Croatia is set to become the 28th Member State of the EU on 1 July, a decade after first applying for membership. With its accession, the population of the EU will increase by around 4.4 million. Croatia was badly affected by the global financial crisis of 2008-09, which hit its tourism-oriented economy hard, and the country has mostly been in recession since 2009.

Croatia has a modest pig sector and will account for less than 1% of total EU-28 pig meat production. On 1 December 2012, its pig herd stood at 1.2 million head, 4% lower than the year before. Last year, 1.2 million pigs were slaughtered, also 4% lower than the year before, with pig meat production at 85,600 tonnes. However, about 30% of pigs are slaughtered on privately owned farms and so are not included in the official slaughter statistics.

Craotia Pork Imports

Source: Croatian Bureau of Statistics, GTIS

Demand for pig meat in Croatia is strong so it is a significant and growing importer of pig meat. In 2012, Croatia imported 46,600 tonnes of pork, up 12% from the previous year; almost all of it is already sourced from within the EU. The experience of previous new Member States suggests that imports may increase post-accession. In addition, the live trade is also somewhat active, with almost 558,000 pigs imported in 2012, down 9% on the year. They were largely made up of weaners, with over 90% coming from the Netherlands and Germany.

EU Sow Prices

Since February, sow prices in the EU have stabilised across the main markets, following the trend in the finished pig market. Although sow prices have picked up from the seasonal dip around Christmas, quotes for the latest week are only marginally higher than the start of the year and are significantly lower than a year earlier. This reflects subdued demand and higher supplies, perhaps due to the effects of the EU sow stall ban rippling through the markets. During the year to date, there were seven per cent more sows culled in both Denmark and Germany than in the same period last year.

Cull Sow Prices in sSelected Members States, 2012-13

Source: lanfdburg & Fodevar, BPEX/AHDB,PVE,AMI

The key German price was unchanged throughout March and April at €1.35 per kg. The picture was similar in Denmark and the Netherlands, with prices stable at €1.03 and €1.15 per kg respectively. Due to the close trade links to the German sow market, GB cull sow prices tend to follow the German M1 sow price. However, with the pound-euro exchange rate fluctuating, the UK cull sow prices has moved somewhat in euro terms during recent months. As a result, the gap between the two prices has varied between 8 and 17 cents. In contrast, at the same time last year the GB price was slightly higher than the German one.

Feed Market Update

UK wheat futures prices were little changed over the last week, closing on Tuesday at £193.50 per tonne, up 45p on a week before. However, global prices increased more than this, following the latest USDA crop conditions report. This showed that only 5% of the intended US maize crop had been planted; normally around a third of the intended area would have been. Ideally, crops need to be planted by mid-May to secure yield potential. Soya prices have also increased over the last week, partly in response to the USDA report but also reflecting the hesitant start to soyabean exports from South America. Earlier in the week, worries over the spread of the Avian Flu in China and possible reduced demand from the Chinese poultry sector put some pressure on soya prices.

In the early months of 2013, pork imports have been lower across a range of Asian markets. Last week we reported a 10% year-on-year fall in Chinese imports in the first quarter of 2013. In the same period, shipments to South Korea were down 30% year on year, as the country’s pig herd has now recovered from the Foot & Mouth Disease outbreak two years ago. All major suppliers were affected but shipments from the US held up better than most, with prices lower as some product was diverted from China (where US pork was subject to increased restrictions).

South Korean Pork Imports, January-March

South Korea Customs & Trade Developments Institutions< GTIS

Hong Kong Pig Meat Imports, January-March

Hong Kong Census & Statistics Department, GTIS

Pork imports to Hong Kong were also lower in the first three months of 2013, down nearly a quarter on the same period last year. Most major suppliers were affected, although Dutch shipments were up by nearly half. Offal imports were also down, by 18%, with EU shipments, which made up more than two-thirds of the total, down by a fifth. Figures for January and February indicate that imports to Japan followed a similar trend, being 9% lower than a year earlier; full first quarter figures are expected in the next few days.

April Pig Market Trends Out Now

The April edition of Pig Market Trends (PMT) was published on Tuesday. As well as the usual coverage of producer prices, slaughterings and production, trade, retail sales and prices, costs of production and other industry news, this month’s edition focuses on the outlook for UK pig meat supplies.

Key messages this month include:

  • Lower breeding herd expected to lead to fewer pigs being slaughtered in 2013
  • Productivity gains and higher carcase weights should mean pig meat production only down marginally
  • Tighter EU supplies and weak pound forecast to lead to lower imports and steady or rising exports
  • GB finished pig prices rising seasonally during March and April but at higher level as supplies tighten
  • EU pig prices stable since start of year on weak demand, so gap between UK & EU prices rising again
  • February another good month for UK exports, particularly of pork and pig offal
  • Producer losses declining as cost of production falls but prices still short of break-even level

May 2013

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