05 April 2012
The price fall which began after Christmas continued until the middle of February, as processors and retailers reportedly had sufficient supplies to meet demand. This was partly due to the availability of cheap imports due to low prices on the continent during January. Prices have since picked up, with the euro-spec DAPP reaching 142.35p per kg in the week ended 24 March, as supplies tighten and increasing pig prices in the EU made UK pig meat more competitive.
The gap between UK and EU pig prices which opened up in the early part of the year closed rapidly as EU prices recovered while the UK market was still falling. By early March, the EU reference price was briefly slightly higher than the UK price. However, since then UK prices have begun to recover while EU prices have eased slightly so a small gap, equivalent to about four pence per kg had reopened by the end of the month. Nevertheless, this is a much smaller premium than normal.
Average carcase weights of pigs in the DAPP sample decreased slightly over the month to average 79.83kg in February, almost one per cent down on year earlier levels. Probe measurements also fell between January and February, to stand at 11.0mm. Carcase weights continued to decline seasonally during March.
The weaner market remained relatively stable between January and February, with the average 30kg weaner price falling only marginally to £44.59 per head. The February price was almost nine per cent higher than its level a year earlier. Rising feed prices limited finishers’ willingness to take a chance on better finished pig prices later in the year. Signs of improvement in finished pig prices in recent weeks have supported some upward movement in weaner prices, with the average price reaching £45.95/head in the week ended 31 March, more than four pounds higher than a year earlier.
The GB cull sow price rose by nearly five per cent over the month to average 115.12p per kg dw in February, more than a third higher than prices seen a year earlier. Prices have continued to strengthen in March on the back of tight supplies in the EU, reaching an average price of 121.51p per kg dw in the week ended 24 March, the highest price recorded since October 2008.
EU Prices and Exchange Rates
Following a dampening of prices in January, the EU average pig reference price gathered momentum in February, increasing by more than four per cent over the month to stand at €157.83 per 100kg dw, nearly 14 euros higher than in the corresponding month of 2011. Prices continued to rise until early March, reaching €161.92 per 100kg, their highest level since October 2008. Since then, prices have been reasonably stable and in week ended 25 March 2012 they stood at €161.64 per 100kg dw. Pig supplies remain tight across many Member States and robust export demand continues to support prices, although domestic demand is more subdued.
With the economic situation in the Eurozone having stabilised following the latest Greek bailout, there was little change in the exchange rate between the euro and the pound during March. The pound has been worth between €1.19 and €1.20 during most of February and March.
UK Slaughterings and Pig Meat Supplies
UK clean pig slaughterings in February 2012 totalled 767,000 head, less than one per cent higher than in February 2011. Once again, Scotland recorded the strongest growth, with slaughterings up by eight per cent to 52,000 head. Throughputs in Northern Ireland were one per cent higher than a year earlier, while numbers in England & Wales were marginally down. The total number of clean pigs slaughtered in the first two months of the year was three per cent up year on year at 1.71 million head.
Slaughterings of cull sows and boars during February totalled 19,200 head, almost all in England. This was about six per cent below AHDB’s estimate for February 2011. Despite this, throughputs for the year remain five per cent above year earlier levels, given the high numbers in January.
The average clean pig carcase weight during February was marginally lower than a year earlier at 79.3kg. The average carcase weight for cull sows and boars was 150kg, slightly higher than a year earlier. The net result was that total pig meat production in February was almost unchanged from a year earlier at 64,000 tonnes. Total production for the year to date was up two per cent at 142,000 tonnes.
During January 2012, the amount of fresh and frozen pork imported into the UK was at its lowest level for nearly two years, despite unit prices being at their lowest level since March 2011. The total of 25,200 tonnes was 13 per cent lower than in January 2011. The fall would have been even sharper but for 15 per cent increases in shipments from both Germany and Spain. A fall of six per cent was recorded in volumes from Denmark, while most other major suppliers suffered even larger declines. Reflecting the trend of most recent months, imports of fresh boneless cuts increased by seven per cent, although with frozen shipments lower, overall boneless volumes were three per cent down year on year. Denmark and Germany were the dominant suppliers of boneless cuts.
Bacon imports during January were also at a lower level; at 19,800 tonnes, they fell below 20,000 tonnes for the first time since August 2009. Again, an increase in shipments from Germany, in this case up 20 per cent, partly offset lower quantities from other suppliers. Overall, imports were 14 per cent lower than a year earlier. In contrast to pork and bacon, imports of sausages and other processed pig meat products continued to grow. Shipments of sausages were only one per cent higher than in January 2011. Dramatic growth in volumes from France was the main factor, outweighing falls from the two major suppliers, Germany and, particularly, the Netherlands. Processed imports were more than 50 per cent higher than a year earlier, with major growth in shipments from Ireland and Denmark.
Exports of fresh and frozen pork from the UK during January 2012 were two per cent above year earlier levels at 10,200 tonnes. With prices higher, the value of UK exports rose by 12 per cent to £12.6 million. Amongst significant markets, the only one to take less UK pork was the Netherlands. There was strong growth in many smaller markets, including Belgium, South Korea, Sweden, Singapore, Spain and South Africa. Frozen shipments were particularly strong, being 17 per cent higher than a year earlier. In contrast, fresh and chilled exports were four per cent lower. There was also modest growth in exports of bacon, while offal exports were more than 50 per cent higher than a year earlier at 2,500 tonnes.
UK LIFFE wheat futures, for May 2012 delivery, generally increased throughout March. On Monday 26 March, the price stood at £177 per tonne, an increase of £12 per tonne since the start of the month. Much of this increase has occurred over the last two weeks of the month as the tight supply situation globally for maize has pushed prices higher. Expectations of strong purchase activity from China have also lifted prices.
The weather situation in South America, which has downgraded expectations for the soyabean harvest, has led to prices increasing considerably in recent weeks. Again this has been buoyed by increased Chinese demand. UK FEMAS soyameal prices, ex-mill Liverpool, were quoted at £351 per tonne in week ended 23 March, an increase of £24 per tonne since the start of the month. Rapemeal prices have also recorded a considerable uplift, reaching £199 per tonne in the latest week, £22 higher than at the end of February.
The latest USDA world supply and demand report was released on Friday 9 March. The estimate of world wheat production increased by 1.14 million tonnes to 694 million tonnes, helped by an expected record crop in Australia. World stocks were lowered by 3.52 million tonnes in response to increased demand for wheat. The stocks to use ratio is currently at 31 per cent. World maize production is expected to be one million tonnes higher at 865 million tonnes. This is expected to result in an undersupply as demand is forecast upwards at 869.5 million tonnes. World stock is thus expected to be lower, with a stocks-to-use ratio of 14 per cent. World soyabean production is expected to be dramatically lower than previous estimates, falling 19 million tonnes from last season, to total 245 million tonnes. World stocks are forecast lower at 57.3 million tonnes giving a stocks-to-use ratio 22 per cent.
The AHDB/HGCA Winter Planting Survey shows that, as at 1 December 2011, the area planted to winter cereals and oilseed rape in England and Wales was five per cent higher than 2010 at 2.98 million hectares. Wheat area was up three per cent, barley up nine per cent, oats up 13 per cent and oilseed rape up six per cent. The survey suggests that UK oilseed rape area is at a new record, subject to confirmation in the summer. The expansion in area follows generally favourable autumn weather in 2011 and strong price incentives. Declines in Scotland partly offset the increases in England and Wales.
The Russian government confirmed last week that there will be no limits on grain exports for the remainder of this season. The Russian government had previously been concerned about domestic supply following record grain exports earlier in the season. To date, total Russian grain exports have reached 22 million tonnes, with the government expecting exports to reach 27 million tonnes by the end of the season.
US maize planting has started well ahead of schedule, given favourable field conditions and warm temperatures. Along with the strong prices on offer, this is expected to result in a surge in the planted area for this season.
The sustained rise in the price of feed ingredients is also reflected in the price of compound pig feed. As a result, the estimated average cost of pig meat production rose by over four pence per kg between February and March and a further rise is anticipated for April. Despite some recovery in the DAPP, the gap between the cost of production and the finished pig price rose to 21p per kg. This is equivalent to a loss of around £16 per pig, the worst situation since April 2011.
In the 12 weeks to 19 February 2012, retail expenditure on fresh and frozen pork increased by six per cent but the amount purchased decreased by three per cent. Reduced purchases were mainly the result of a significant decrease in sales of leg roasting joints, which declined by 31 per cent year on year. Fewer retail promotions have driven this severe decrease. More belly and loin roasting joints were purchased, up 18 and three per cent respectively. Reduced promotional activity led to a nine per cent increase in the average price paid by consumers. Pork volume sales were particularly poor in the week between Christmas and New Year and this has driven the decline in the latest 12 week figures. Since the turn of the year, the situation is more positive with purchases up nearly two per cent year on year during the first seven weeks of 2012.
In the latest four-week period, fresh and frozen pork purchases were one per cent lower than the same period a year earlier. However, expenditure increased by six per cent compared to the previous year, as reduced promotions increased the average price paid by consumers. Volume decreases were driven by the main roasting joints with leg and shoulder down 21 and 16 per cent respectively. Belly continues to be the best performing cut, with purchases up 17 per cent in the latest 4-week period.
In the latest 12-week period, bacon purchases were unchanged year on year, with expenditure rising by one per cent. However, the latest four-week period was more positive with volume purchases returning to the significant growth recorded during 2011, being 10 per cent up on a year earlier. Rashers were the main driver of this, increasing 13 per cent compared to the previous year aided by increased retail promotional activity. Joints also continue to perform well, four per cent up in the latest period.
Purchases of processed pig meat products were also strong during the 12 weeks to 19 February, compared with a year earlier; sausages and sliced cooked meats were one per cent and five per cent higher respectively. Prices for both were slightly higher year on year. Sausages performed even better in the last four weeks, with purchases up by seven per cent on last year, while sliced cooked meat sales were up four per cent.
DOWNLOAD REPORT:- Download this report here