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BPEX UK Pig Meat Market Update


09 February 2012

BPEX UK Pig Meat Market Update - February 2012BPEX UK Pig Meat Market Update - February 2012

Deadweight pig prices remained strong towards the end of the year, with the Euro-spec DAPP averaging 147.74p per kg dw in December.
British Pig Executive Monthly UK Pig Meat Market Update

UK Prices

This was a slight improvement on the November price and almost 11 pence higher than year earlier levels. However, in the first few weeks of the New Year, the DAPP has fallen sharply, down to 142.31p per kg dw in the week ended 28 January. Nevertheless, this is still six pence higher than the corresponding week in 2011. A number of factors have combined to drive prices lower, including weak consumer demand post-Christmas and sharp falls in EU pig prices, combined with a weakening euro, leading to greater availability of cheap imports.

Since mid December, the gap between the UK and EU reference prices has widened from about 6p per kg to over 17p in mid January. 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. It stood at 12p per kg in week ended 29 January.

Average carcase weights of pigs in the DAPP sample were once again slightly down on year earlier levels, falling almost one per cent between November and December to average 78.54kg. Probe measurements also fell in December to average 11.1mm. However, in the first few weeks of January both carcase weight and probe measurements have increased.

Weaner prices continued to edge up, increasing by almost five per cent between November and December to stand at just over £44 per head, more than £2 per head higher than year earlier levels. This upward trend continued into the New Year with the average 30kg weaner price reaching just over £45 per head in the week ended 14 January. However the price fell marginally, to reach £44.59 in week ending 4 February, the first decrease in price since the beginning of October. The market is well balanced at the current price with optimism about finished pig prices later in the year offset by some uncertainty about the direction of feed prices following recent rises.

Following six months of steady increases, GB cull sow prices peaked in mid December before falling back. Prices averaged 113.75p per kg dw in December, marginally lower than the November average but 26 per cent higher than a year earlier. From mid December, the normal seasonal fall in demand from manufacturers during the holiday period and reduced export demand due to the weak euro and lower prices on the continent have pushed prices down. By week ended 28 January the average price had fallen to 107.65p per kg dw, its lowest level since mid October.

EU Prices and Exchange Rates

The EU average pig reference price remained relatively stable in the last two months of 2011, falling slightly between November and December to stand at €159.34 per 100kg dw, still 14 per cent higher than in the corresponding month of 2010. In the last week of December however, prices started to decline and in the week ended 22 January 2012 had fallen to just under €149 per 100kg dw, a fall of over ten euros in five weeks. Despite this, the price was still 13 per cent higher than at the same point a year earlier. Prices began to recover at the end of the month, particularly in Northern Europe, and the average rose by over two euros to stand at over €151 per 100kg in week ended 29 January.

The ongoing economic problems in the Eurozone, has led to the euro weakening against the pound in recent months. This trend has accelerated since October, when there were €1.15 to the pound. By January, the exchange rate had risen to average €1.20 to the pound, its highest level since mid-2010. Having reached this level towards the end of the year, the exchange rate was relatively stable during January.

UK Slaughterings and Pig Meat Supplies

Improved herd productivity was the main driver of the six per cent increase in clean pig slaughterings during 2011 to 9.8 million head, the highest level recorded since 2002. Scotland recorded the strongest growth, up by 12 per cent to 628,000 head, while Northern Ireland slaughtered 1.6 million clean pigs, five per cent more than in 2010. Official figures no longer cover sow slaughterings, but AHDB estimate that 250,000 head were killed during 2011, 13 per cent more than in 2010 as producers improved herd performance by replacing unproductive sows.

High feed prices encouraged producers to market pigs earlier, leading to little change in the average carcase weight of clean pigs at 78.3kg. This halted, temporarily at least, the steady upward trend of recent years. As a result, total production of pig meat was also up by six per cent to 806,000 tonnes.

In December 2011, clean pig slaughterings in the UK totalled 747,000, five per cent higher than in December 2010. As for the year as a whole, growth was particularly strong in Scotland, while Northern Ireland slaughterings were marginally below their level a year earlier. AHDB estimates are that sow slaughterings remained well above year earlier levels, totalling 18,000 head, a rise of over 20 per cent on the same period last year.

Clean pig carcase weights tend to decline during December as producers market pigs earlier before the holiday period. This year, the reduction was lower than normal, so the average carcase weight during December was 78.1kg, 0.8kg higher than in December 2010. The average carcase weight for cull sows was 151.2kg in December, very close to the average for the year. Total pig meat production in December was 61,000 tonnes, up seven per cent compared with the same month last year.

UK imports of fresh and frozen pork during November 2011 totalled 32,000 tonnes. This was one per cent higher than in November 2010. Higher shipments from most major suppliers were partly offset by decreased volumes from Belgium and Ireland. The value of imports rose by 14 per cent as prices were substantially higher. Most of the increase was due to growth in the quantity of boneless cuts imported. Shipments of loin and leg cuts were lower than a year earlier.

For the first time since August 2010, UK bacon imports were above year earlier levels in November 2011, with shipments up by two per cent. The increase was driven by higher volumes from Denmark and Germany, while shipments from the other major supplier, the Netherlands, were lower than in 2010. Imports of sausages were up by 18 per cent, with increased volumes from most suppliers, with the exception of Poland and Ireland. Processed imports recorded even faster growth, being 39 per cent higher than in November 2010, with Danish shipments more than trebling.

Imports of fresh and frozen pork for the first 11 months of the year were three per cent higher than in the same months of 2010. The growth has been driven by shipments from Denmark, up by 20 per cent. Germany and France also recorded increased imports, but the Netherlands and Belgium shipped significantly lower volumes. In contrast, bacon imports were down by 11 per cent year on year, with Germany the only major suppliers providing increased shipments. Sausage imports were up by 18 per cent on the year and processed pig meat imports by 28 per cent. In both cases, supplies from the Netherlands were again an exception to the general growth.

Exports of fresh and frozen pork from the UK in November totalled 12,000 tonnes, 18 per cent lower than in November 2010, which was a record month for exports. Hong Kong was once again the largest market, taking 22 per cent of UK pork exports, with volumes up by 55 per cent. In contrast, exports to the EU were over 30 per cent lower than a year earlier, led by falls in shipments to Germany and Denmark, albeit from unusually high levels in November 2010.

Pork exports for the first 11 months of the year were up by 12 per cent on the same period last year, totalling 133,000 tonnes. Over the year, Germany remained the largest market but shipments were little changed from year earlier levels. However, the recent boom in exports to Hong Kong/China means that these markets may have overtaken Germany once figures for the year as a whole are available next month. Other significant growth markets include France, South Korea, Sweden and Cyprus, all of which took at least twice as much UK pork as in the same period of 2010.

Feed Prices

LIFFE wheat futures, for May 2012 delivery have increased by £10 per tonne since the turn of the year. While staying fairly stable throughout most of January prices pushed through the £160 per barrier during week ended 27 January, reaching £165.50 by the end of the week. Prices at this level have not been witnessed since September. The rise came amid concerns over South American crops following adverse weather conditions and over the availability of exports from the Black Sea region.

Grain exports in the Black Sea region are under pressure due to logistical difficulties. The three main countries, Kazakhstan, Ukraine and Russia have all reportedly struggled, with both Russia and Kazakhstan short of rail cars to move their grain. The cold winter conditions are also affecting movements. Even so, Russian exports are set for a record season, which may result in the Russian government curbing shipments if forecast export levels of 23-25 million tonnes for 2011-12 are realised.

UK FEMAS soyameal prices, ex-mill Liverpool, were quoted most recently at £316 per tonne, up £6 per tonne on the previous week, and £18 per tonne higher than at the start of month. Latest rapemeal prices increased £4 per tonne week on week to average £162 per tonne for ex-mill Erith. However this was £4.50 per tonne lower than the levels at the start of the month.

Latest UK supply and demand estimates from DEFRA indicate that both the wheat and barley surpluses will be lower than previously thought. Total wheat availability is estimated at 17.7 million tonnes as imports are expected to be lower and the final production figure was revised down by approximately 100,000 tonnes. UK barley availability is approximately 150,000 tonnes lower than previous estimates at 6.49 million tonnes, as the final production figure was lower by a similar amount.

Animal feed usage of wheat is expected to be six per cent higher than last season at 6.49 million tonnes as the price relationship with barley favours the use of wheat. As a result, animal feed usage of barley is expected to be 11 per cent lower at 3.04 million tonnes.

Animal feed usage of wheat is expected to be six per cent higher than last season at 6.49 million tonnes as the price relationship with barley favours the use of wheat. As a result, animal feed usage of barley is expected to be 11 per cent lower at 3.04 million tonnes.

UK wheat exports reached 443,000 tonnes in November 2011 according to the latest data from HMRC, the largest single monthly volume since November 2008. This brings UK wheat exports in the first 5 months of the 2011/12 season to just over 1.25 million tonnes, compared with 1.64 million tonnes at the same point in the 2010/11 season.

Since the New Year, prices for most components of pig feed have begun to rise. As a result, the estimated average cost of pig meat production rose by about four pence per kg between December and January. With the DAPP falling, the cost of production was around 17p per kg above the DAPP, equivalent to a loss of around £13 per pig. Nevertheless, the situation is better than in January 2011 when producers were estimated to be losing well over £20 on each pig.

Consumption

In the 12 weeks to 25 December 2011, purchases of fresh and frozen pork increased slightly, while expenditure increased by six per cent. Expenditure has outgrown volume sales in recent periods due to an increase in average price of six per cent, driven by reduced promotional activity by retailers in the last quarter of 2011, especially on shoulder roasting joints. Belly and frying/grilling cuts were the drivers of increased purchases as they were the focus of retailer’s fresh pork promotions.

In the latest 4-week period, the amount of fresh and frozen pork purchased fell by four per cent. Expenditure grew five per cent due to average prices being nine per cent higher than in December 2010. The significant increase in average price was driven by fewer price reduction promotions on fresh pork roasting joints which suffered significantly reduced purchases as a result. Frying/grilling cuts, belly and shoulder roasting joints, were all purchased in greater quantities.

In the latest 12-week period, the quantity of bacon purchased increased only marginally as the growth experienced earlier in 2011 has slowed; sales in the latest 4-week period were actually one per cent down on the previous year. The slowdown in growth has been driven by sales of rashers, which are one per cent down on the same 12-week period last year. Bacon joints continued to perform well, up three per cent, as consumers looked for cheaper protein cuts.


February 2012

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