BPEX UK Pig Meat Market Update
06 July 2012
During May, the EU-spec DAPP averaged 148.97p per kg, nearly three pence higher than in April but only marginally higher than in May 2011. The price fell below its level a year earlier for the first time in over 12 months at the end of May. Since then, prices have continued to edge higher but by week ended 23 June, the DAPP was more than two pence lower than a year earlier at 149.99p per kg.
After a period of stability, carcase weights of pigs in the DAPP sample resumed their seasonal fall during May and June, although they remained above year earlier levels, partly due to better growing conditions this winter. At 78.5kg, the May average was 0.2kg below the April figure but 0.8kg higher than in May 2011. By mid June, the average weight had fallen to just below 78kg.
Weaner prices fell steadily during May and the first half of June. Given improved productivity, the supply of weaners has remained relatively high but the number of places available has been limited. This has not been helped by high and rising feed costs. The average price for a 30kg weaner fell by more than a pound between April and May to £44.45 per head. This was below the price a year earlier for the first time since November. Prices continued to fall during June, reaching little more than £42 per head by the end of the month.
Falling demand and the weak euro led to an easing back of cull sow prices from their peak around Easter. The average May deadweight price was just below 117p per kg, almost five pence lower than in April. Nevertheless, this is still more than 15 pence higher than a year earlier. Prices have continued to fall back during June, falling below 116p per kg by week ended 23 June.
During May, pig price trends varied between EU Member States but overall there was little change in the average price. Tight supplies across most of the EU have been offset by subdued demand within the EU, not helped by the poor weather, and in some major third country markets. The EU average pig reference price for May was €162.85 per 100kg dw, fractionally lower than in April but still nearly four per cent higher than a year earlier. From mid May, prices began to rise again increasing by four per cent in four weeks to reach nearly €169 per 100kg, the highest level since September 2008.
Having fallen sharply earlier in the year, the euro was relatively stable against the pound during May and June. This meant that, in sterling terms, EU prices increased more rapidly than UK prices, narrowing the gap between them to less than 10p per kg in mid June. However, the exchange rate movement meant that, in euro terms, the UK price was at an all time high of over €180 in May.
After a lengthy period of rising weaner prices, culminating in a new record of nearly €52 per head in late April, prices began to ease back during May. The monthly average price was four per cent lower than in April at just over €49 per head. The trend of falling prices continued into June as high feed prices reduced demand for weaners. Nevertheless, prices were still around €10 per head higher than a year earlier.
Despite remaining strong, cull sow prices began to ease back during May and early June. The German M1 sow average price fell by one per cent between April and May to €1.44 per kg, before falling further during June. Prices in the Netherlands and Denmark fell more sharply. The Dutch average for May was €1.28 per kg, down three per cent on the month, while the Danish average of €1.10 was down five per cent. Nevertheless prices remained around 20 per cent higher than a year earlier.
UK Slaughterings and Pig Meat Supplies
UK clean pig slaughterings in May were almost six per cent higher than year earlier levels at 753,000 head. Throughputs last spring were slightly subdued due to the harsh winter weather experienced earlier in the life cycle of the pigs finished during that period. The increase was driven by rises of seven per cent in English and Welsh slaughterings and eight per cent in Scottish throughputs. In addition, slaughterings in Northern Ireland were almost one per cent higher on the year. This takes the total number of clean pigs slaughtered in the UK so far this year to 4.16 million head, an increase of four per cent on the corresponding period in 2011.
Cull sow and boar throughputs at UK abattoirs during May totalled almost 19,000 head. This represented a marginal decrease on AHDB estimates for May 2011, perhaps reflecting recent falls in cull sow prices. Nevertheless, in the first five months of the year adult pig slaughterings were four per cent ahead of 2011 levels at 109,000 head.
UK clean pig carcase weights in May were marginally higher than in the corresponding month of 2011 at 77.9kg while adult carcase weights were two per cent lower on the year at 151.3kg. As a result of the increased throughputs, pig meat production in May was six per cent higher year on year at 61,500 tonnes. Total pig meat production for the year to date reached 344,000 tonnes, up almost four per cent on the year.
UK imports of pork remained subdued in April, continuing the trend of the first quarter of the year. Shipments were 15 per cent lower than in April 2011 at 26,000 tonnes. Shipments from Denmark and the Netherlands fell 24 per cent and 33 per cent respectively. Volumes from a number of other markets, including Ireland and Belgium were also considerably lower on the year. In contrast, volumes from Germany and France were up 23 and 20 per cent respectively.
As in previous months, shipments of fresh loins were lower than a year earlier, down by 24 per cent. However, there was an even sharper fall for fresh hams and shoulders, with volumes less than half of those in April 2011. The consistently lower pork shipments this year have resulted in imports for the year to date being 12 per cent back on the year at 105,500 tonnes.
Bacon imports to the UK in April were also reduced, with shipments totalling 17,400 tonnes, 19 per cent lower than in April 2011. This is a considerably greater contraction than in the previous three months. Shipments from the three major suppliers, the Netherlands, Denmark and Germany were all significantly lower than a year earlier. Bacon imports for the year to date totalled 82,700 tonnes, down 12 per cent compared with the first four months of 2011 and almost a quarter less than in the corresponding period in 2010. Shipments of processed products remained strong, despite imports of sausages being down by 13 per cent. Other processed shipments were 69 per cent higher than in April 2011.
UK exports of pork in April totalled 12,600 tonnes, up 12 per cent on the year. This was largely as a result of a similar growth in shipments to other EU Member States. While most markets took increased volumes, a significant growth in shipments to Sweden was recorded, although this is not apparent in Swedish import statistics. Shipments to Sweden totalled over 1,100 tonnes compared with less than 100 tonnes in the corresponding month of 2011. In the year to date, UK exports totalled 48,200 tonnes, seven per cent up on the year and almost 15 per cent more than in the first four months of 2010. An increase in unit prices meant that the value of pork exports increased by 17 per cent to £61 million.
Exports of most other categories of pig meat were also higher in April 2012 than a year earlier. Offal exports rose by 39 per cent to 3,200 tonnes while exports of sausages and other processed products were also higher.
June has been an interesting month in the grain and oilseeds markets. US CBOT December maize futures prices have risen over 30 per cent since the start of June from £127 to £167 per tonne while UK November wheat futures have gained £20 per tonne to reach £177.25 per tonne on 2 July.
Weather has been the main driver with hot and dry conditions in the US creating concerns over the yield potential of the US maize crop. The area planted is the highest since 1937 but, after a promising start, the crop has deteriorated in the heat. The most recent USDA crop condition report, published on 2 July, cut the share of crops rated good or excellent to 48 per cent, with 22 per cent poor or very poor. This time last year 69 per cent was rated good/excellent. In June, USDA forecast US maize yields at 10. 42 tonnes per hectare but independent analysts now expect lower yields. With the crop at the critical pollination stage rain is urgently required to maintain yield potential. The International Grain Council cut the expected US maize crop by 5 million tonnes in their 2 July report.
Drought conditions have also impacted on the Black Sea region this year and any rain is likely to be too late to improve yields in Southern Russia and Ukraine as harvest has already started. Wheat yields so far have been disappointing but the earliest crops are likely to be some of the poorest. The US winter wheat crop was able to develop well ahead of the hot, dry spell and harvest has progressed quickly with 69 per cent complete, according to the latest USDA report. In general, yields have been good although weather has caused some regional variation.
For soyabeans, CBOT November soyabean futures were up £46.80 from the beginning of June, to £340 per tonne. UK prices have followed a similar trend with home produced Hi-Pro soyameal, ex-mill Liverpool rising from £377 per tonne at the end of May to £412 in week ended 22 June. Argentinean farmers have nearly finished harvesting their soyabean crop, with production estimated at 40.5 million tonnes (49Mt in 2011/12). US soyabean crops have been affected by the drought with just 45 per cent considered in good or excellent condition. Farmers in southern growing states, who had harvested wheat early, had hoped to double crop land with soyabeans but the opportunity to do this may be limited due to low soil moisture.
In the UK, ADAS reports that the wheat crop at the end of June had good yield potential but the next four weeks are critical to grain fill with brighter weather required. Crop development is estimated to be seven to ten days behind 2011 progress. The uncertainty over the timing and quality of the UK harvest is also creating activity on the old crop market with UK July futures at £190 per tonne as more wheat is needed to cover demand until the new harvest arrives. The UK uses around 200,000 tonnes of wheat per week at this time of year.
On the UK demand side, the major swing factor is the start of bioethanol plants in the North East. Vivergo Fuels publicise a summer start while Ensus have not given a date for their re-start. At full capacity both will use around 1 million tonnes of wheat per year, and importantly they would also introduce new supplies of DDGS into the animal feed market.
Weather conditions across the globe will continue to drive markets through to October when more clarity will exist on actual production.
The steady rise in the full cost of production for finished pigs continued during May, based on AHDB estimates. Estimated costs rose by three pence per kg between April and May, taking the cost to nearly 168p per kg dw. The gap between the cost of production and the DAPP remained around 19 pence, equivalent to an average loss of about £15 per pig.
Provisional estimates for June and July show further increases in the cost of production are likely, with the July estimate exceeding 170p per kg, one of the highest figures ever recorded. A significant increase in the DAPP will be required to keep pace with rising costs.
Household expenditure on fresh and frozen pork increased by five per cent in the 12 weeks to 10 June 2012, with £217 million spent on pork. Nevertheless, the quantity of pork purchased declined by three per cent. The decline has been driven by reduced purchases of leg and shoulder roasting joints, recording falls of 18 per cent and 14 per cent respectively. Changes in promotional activity had a heavy influence on these trends. In the latest 12 weeks, 13 per cent of pork shoulder was sold on promotion, considerably lower than last year’s figure of 28 per cent. There was also lower promotional activity on pork leg joints. The strongest increase in purchases came from pork loin roasting joints, with a 46 per cent year-on-year increase.
During the latest four-week period fresh and frozen pork volume purchases were one per cent lower than a year earlier, while expenditure was up by four per cent. The fall in purchases was driven by a reduction of nearly a quarter in purchases of frying/grilling chops. The lower promotional activity on chops over the past four weeks will have been a contributing factor. There were also lower purchases of frying/grilling steaks, shoulder and leg roasting joints. The strongest increase in purchases came from pork belly, with a rise of 14 per cent year-on-year. Additional promotional activity helped drive this increase, with 33 per cent of pork belly being sold on promotion, in comparison to 17 per cent last year.
In the latest 12-week period, the amount of bacon purchased was two per cent higher than a year earlier while expenditure was up by four per cent. Rashers were the main driver behind the increase in volume purchases, although chops recorded the strongest year-on-year increase, up by 74 per cent albeit from a very small base.
In the past four weeks, purchases of bacon declined two per cent, while expenditure declined four per cent year-on-year. Bacon joints have been a significant driver of this, with volume sales down nine per cent compared with last year. Bacon rashers have seen a one per cent reduction in volume purchases but remain the largest bacon segment by far.
Pork sausages recorded a four per cent year-on-year increase in purchases in the latest 4-week period. Expenditure rose by seven per cent to £51.3 million. Purchases of sliced cooked meats were also higher than a year earlier, rising by three per cent. Other popular picnic items such as sausage rolls (up seven per cent) and pork pies (up five per cent) also recorded strong increases in volume purchases, benefiting from the Jubilee holiday period at the start of June. Nevertheless, disappointing weather conditions have meant that, over the full 12-week period, purchases of all these processed products were lower than a year earlier.
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