BPEX UK Pig Meat Market Update
06 March 2012
Prices have continued to decline into
February, with the euro-spec DAPP losing almost a further four pence to reach 139.52p per kg in the
week ended 18 February. This is the lowest price since April 2011, as lower consumer demand
combined with ready supplies to ensure that market conditions remained tough for producers.
Between mid December and mid January, the gap between the UK and EU reference prices widened from about 6p per kg to over 20p. This was partly driven by sharp price falls on the continent and partly by the strengthening of the pound against the euro. Since then the gap has reduced as EU prices have recovered and the euro has strengthened. By week ended 18 February, the gap was down to just 4p per kg.
Carcase weights of pigs in the DAPP sample increased by nearly two per cent between December and January to average 80.0kg and have held firm in the first few weeks of February. The January average is marginally down on year earlier levels. Probe measurements also increased over the month to reach 11.2mm in January, the same average as in January 2011, but measurements have since fallen to 11.0mm in mid February.
Weaner prices held firm between December and January, with the average 30kg weaner price increasing by less than two per cent to £44.76 per head, almost three pounds per head higher than year earlier levels. There has been very little change in the price during February, with the average remaining within a few pence of the January average. The market is well balanced as optimism about future finished pig prices is offset by a rise in feed prices since the New Year.
GB cull sow prices followed the usual seasonal trend and decreased between December and January, down by three per cent to average 109.69p per kg dw due to weak demand on the continent. Nevertheless, the price was nearly 30 pence higher than a year earlier. By the end of the month prices had begun to increase again as supplies have tightened in key export markets. This increase continued into February and by week ended 18 February the average price had reached 114.50p per kg, a rise of nearly seven pence in three weeks.
EU Prices and Exchange Rates
The EU average pig reference price decreased by five per cent between December and January to stand at €151.37 per 100kg dw, still 12 per cent higher than in the corresponding month of 2011. In mid-January, prices fell to just under €149 per 100kg dw as consumer demand was weak in the post-Christmas period. However, since then prices have increased rapidly as the supply of pigs has tightened. By week ended 18 February, the price had recovered to €157.71 per 100kg, about 12 euros higher than a year earlier. Prices in most of the major pig producing Member States followed a similar trend.
The economic problems in the Eurozone led to the euro weakening against the pound through the autumn and into the New Year, rising to over €1.20 to the pound through most of January, its highest level since mid-2010. However, following the agreement of the Greek bailout, the euro regained some of the lost ground to stand at around €1.18 to the pound in mid February.
UK Slaughterings and Pig Meat Supplies
UK clean pig slaughterings in January 2012 totalled 943,000 head, five per cent higher than in January 2011. As has been the case in most recent months, Scotland recorded the strongest growth, with slaughterings up by nearly a quarter to 64,000 head. In contrast, throughputs in Northern Ireland were one per cent lower than in January 2011 at 155,000 head.
From January, Defra resumed the publication of figures for slaughterings of cull sows and boars, given the increase in the number of plants killing them. The number slaughtered during the month was 25,600 head. This is 11 per cent higher than AHDB’s estimate for January 2011.
Clean pig carcase weights are normally high during January due to the marketing of some pigs which were held back over the holiday period. This year was no exception, with the average carcase weight fractionally over 79kg, its highest level since February 2011 but marginally lower than a year earlier. The average carcase weight for cull sows and boars was 149kg, slightly lower than the average during 2011. Total pig meat production in January was 78,000 tonnes, up five per cent compared with the same month last year.
UK imports of fresh and frozen pork during December 2011 totalled 31,000 tonnes. This was five per cent lower than in December 2010. Shipments from most major suppliers were lower than a year earlier, with the exception of Germany. This was partly offset by increased volumes sourced from smaller suppliers such as France, Spain, Portugal and Poland. Shipments of boneless cuts were seven per cent higher than a year earlier but most other cuts were imported in smaller quantities.
During December 2011, UK bacon imports were eight per cent lower than a year earlier. Germany was again the only significant supplier which shipped increased quantities. In contrast, imports of sausages were 35 per cent higher than in December 2010, with increased volumes from all major suppliers and particularly strong growth in imports from Poland. Processed imports recorded even faster growth, being 67 per cent higher than a year earlier, with shipments from Denmark and Ireland more than trebling.
For the whole of 2011, imports of fresh and frozen pork were two per cent higher than in 2010 at 372,000 tonnes. Denmark reinforced its position as the largest supplier of pork to the UK, recording growth of 18 per cent on the year. It now accounts for nearly a third of pork imports. Despite a nine per cent fall in shipments, the Netherlands remained the second largest supplier. In contrast, bacon imports were down by ten per cent compared with 2010, with Germany the only major supplier providing increased shipments. Sausage imports were up by 20 per cent on the year, with very strong growth in shipments from France a factor, and processed pig meat imports by 32 per cent, led by Denmark.
For the second month running, exports of fresh and frozen pork from the UK were below year earlier levels. Shipments were down by 12 per cent to 11,000 tonnes. Most major markets took lower volumes, with quantities sent to Ireland down by 42 per cent and to Hong Kong by 25 per cent. This contrasts with recent months when shipments to Hong Kong have grown strongly and is reflected in a sharp fall in exports of frozen pork, for which it is the major market. The general fall was partly offset by higher shipments to smaller markets such as Belgium, France and Denmark.
Pork exports for the year as a whole were up by 10 per cent year on year, totalling 144,000 tonnes. This is the highest annual export figure since 2000. Over the year, Germany remained the largest market for UK pork, with shipments little changed from year earlier levels. Most of its trade was in the form of carcases or half-carcases; Germany accounted for over 80 per cent of UK exports of carcases. However, Hong Kong/China overtook Ireland and the Netherlands to become the second largest market, accounting for over 20 per cent of shipments. Other significant growth markets during the year included France, South Korea and Sweden, all of which took at least twice as much UK pork as in 2010.
LIFFE Wheat futures, for May-12 delivery, have shown little change throughout February, trading between £165 and £170 per tonne. In the week ended 24 February, prices reached a high of £168.40 on Monday before falling in the wake of the Greek bailout and some bearish sentiments from the USDA. By the end of the week, prices had fallen to £165.50 per tonne.
UK FEMAS soyameal prices, ex-mill Liverpool, were quoted at £323 per tonne for week ended 24 February, unchanged on week earlier levels and approximately £10 per tonne higher than at the start of the month. Rapemeal prices were up £5 per tonne to average £177 per tonne for ex-mill Erith, this being £15 per tonne higher than at the start of the month.
The latest USDA World Agricultural Supply and Demand Estimates report, released on 9 February, forecast world maize production for the 2011/12 season to be 4 million tonnes lower at 864.1 million tones, solely as a result of a decline the Argentinean crop due to adverse weather conditions. Somewhat unexpectedly, the Brazilian crop was not revised downwards, remaining unchanged at 61 million tonnes. Closing stocks were estimated at 125.4 million tones, almost 3 million tonnes lower than previous estimates. Expectations are for a new record closing wheat stock, with the estimate revised upwards by 3.1 million tonnes to 213.1 million tonnes.
The world soyabean production estimate was revised downwards by 5.5 million tonnes to 251.5 million tonnes, as production in both Argentina and Brazil was expected to be lower. Overall closing stocks of soyabeans are expected to be 3.2 million tonnes lower at 60.3 million tonnes. The dry weather has reportedly had a detrimental effect on both the Brazilian and Argentine soya crops. The Argentine crop was estimated to be 10 per cent lower at 48 million tonnes and the Brazilian crop was estimated at 70 million tonnes. However, the Argentine government estimates the 2011/12 soyabean crop at 43.5-45 million tonnes, well below the current USDA estimate.
The USDA held its annual Outlook Forum on 23 and 24 February. At this event, 2012 planting estimates were indicative of farmers responding to the strong prices on offer. Pre-planting forecasts for maize show an area of 38 million hectares, which would result in a record crop of 362 million tonnes and end stocks that would be more than double the 2011/12 levels. The wheat area in 2012 is forecast at 23.5 million tonnes, an increase of seven per cent on 2011 levels.
The latest forecast from the Australian Bureau of Resource Economics and Sciences indicates that the winter grain crop will reach a new record high of 45.4 million tonnes. Winter wheat production has been increased by four per cent from previous expectations with exports three per cent higher. Canola (oil seed rape) production is expected to be 12 per cent higher than previous forecasts with exports six per cent higher.
The Ukraine has reportedly agreed to limit grain exports in the February-July period to 1.7 million tonnes. This comes as crops have suffered from poor growing conditions with the government wishing to protect domestic stocks. Reports suggest that almost half of this quota had already been booked as of 17 February.
Following rises in the New Year, prices for most components of pig feed have begun to stabilise. As a result, the estimated average cost of pig meat production rose by about four pence per kg between December and January before falling slightly in February. Even so, with the DAPP falling, the cost of production was around 19p per kg above the DAPP, equivalent to a loss of around £15 per pig, the worst situation since April 2011. Nevertheless, the situation is better than a year earlier when estimated losses were equivalent to nearly £30 per pig.
In the 12 weeks to 22 January 2012, expenditure on fresh and frozen pork increased by five per cent but the amount purchased declined by nearly four per cent. Belly was the only cut to have increased purchases, while leg and shoulder roasting joints suffered the greatest declines, down 27 and 10 per cent respectively. Reduced promotional activity on these roasting joints drove sales declines but also meant a nine per cent increase in the average price paid by consumers for pork.
In the latest four-week period, fresh and frozen pork purchases were just over four per cent lower year on year. Expenditure however continued to increase, up seven per cent compared to January 2011. Again, the driver was heavy declines for leg and shoulder roasting joints, while frying/grilling cuts also fell. These cuts have all suffered from a decrease in price promotions compared with the same period last year. Positively, belly and loin roasting joints had significant increases in purchases during January due to some increased promotional activity.
In the latest 12-week period, the amount of bacon purchased decreased for the first time in over a year. An increase in the average price meant that expenditure rose one per cent. Rashers drove the decline , with purchases down three per cent. Bacon joints continued to perform strongly, increasing purchases by two per cent as shoppers opted for it as a cheaper alternative. As with bacon, for the first time in over a year fewer sausages were purchased than a year earlier. In contrast, purchases of sliced cooked meats were five per cent higher than in the same period last year.
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