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AHDB Pork Weekly Export Bulletin


03 June 2013

BPEX Weekly Export Bulletin - Week 22BPEX Weekly Export Bulletin - Week 22


British Pig Executive Weekly Export Bulletin

CAHE was again competitive with a strong presence from the main pig genetic exporters, particularly from Denmark and the Netherlands. The British stand was kept very busy and our breeders reported good business. We presented a paper to the World Pig Forum. However, we were eclipsed by the Danes who staged a full day conference. Good shipments of gilts and boars will take place this year to China.

May 31st is the deadline for the implementation of the PRRS measures on pork exports to South Africa. BPEX, in collaboration with Defra, have worked hard in recent months in order to produce a list of PRRS-free cuts acceptable to DAFF. The Export Health Certificate for PRRS-free products is being revised accordingly under 7579EHC and a new certificate for pork for further processing has been made available under the revised 7319EHC.

A pork consignment to the USA was rejected because the identification number was not followed by the letter “A”, thus the consignment did not match the documentation. It is worth stressing once more that export documentation must be absolutely perfect. A further example, over the last couple of weeks all New Zealand meat exports to China were blocked because the New Zealand authorities changed the title of the Ministry on the top of some certificates.

See below full report on the proposed takeover of Smithfield Foods, the world’s largest pig producer by Shuanghui, the Chinese pork leader.

China

Special Report: Take Over of Smithfield Foods by Shuanghui

This momentous event that is likely to change the face of world pork production was predictable. We have discussed in the past that the Chinese would make further major investments in Europe and North America in two strategic directions: to secure food supplies and acquire technology. The high offer at US$ 7.1b (£4.5b), including debt, represents a premium of 31% to Tuesday’s close and a hefty 17 times forward earnings. It is likely to be approved by shareholders, the Committee on Foreign Investment and Competition authorities. The proposed alternative would have been a break up of the group. This would have made it unattractive to Chinese buyers who favour integrated businesses and it would not have been assured that buyers would have been found for the pig production division. Shuanghui and Smithfield have been collaborating over the last four years.

US farmers will be pleased, as Chinese ownership opens the door to greater exports to China. It is an important and welcome signal, that Chinese imports are here to stay. Imports are predicted to increase from the current 2% of total Chinese consumption, excluding offal. Despite formidable investment, domestic Chinese production continues to face major challenges. In this sense, British pork producers should welcome the deal.

Food safety, a given in the Western World, is a major issue in China, from dairy infant formula to poultry and pork. Access to safe, quality pork is part of the deal. Let’s not forget that Shuanghui was tainted by a major scandal two years ago. The association with Smithfield Foods, already the largest pork exporter to China, will benefit from the association of a foreign name on a distrusted brand.

Smithfield currently exports 20% of its production. Larry Pope, Smithfield’s CEO, now expects exports “to explode”. It is also helpful (and not coincidental) that Smithfield is leading the USA with ractopamine-free pork as Chinese and Russian authorities have clamped down on the presence of the feed additive.

France

Industry in trouble

Both producers and processors feel trapped, raw material costs of pig feed have increased by 31% and retailers refuse to raise prices. Competition, mainly from Germany but also Spain, is another threat to the French industry. Focus on development of Viande Porcine Française (VPF - see below) and increased export development are both seen as key elements to improve returns. The recent visit to China by President François Hollande should strengthen France’s position on the Chinese market, notably for stomachs, pig ears, trotters and other parts highly valued on Asian markets.

VPF Everywhere

Following a declaration of support from the Minister of Agriculture, Stéphane Le Foll, French pig producers are increasing pressure on the French government. On 14 May the Minister confirmed his wish to see prices improve and one retailer, Système U, agreed to increase prices as long as it is guaranteed to be passed on to the producer. Jean-Michel Serres, President of the Pig Producers Association, mentioned that Intermarché would approve price increases, at least on fresh pig meat. Following this, producers have decided to make their point and are increasing store checks to ensure the visibility of the VPF logo, not only on standard brands but also on retailers’ own brands.

Retailers/Cooperatives Engage in Debate

FCD, the Federation of French retailers, has declared that cooperatives are trying to protect their returns from higher cereal prices. Jacques Creyssel, General Delegate of FCD, has pointed out that Xavier Beulin, the current President of FNSEA (Farmers’ Union), is also president of Sofiproteol which is the largest oilseed crusher with a turnover of €7.3bn and a major operator in the animal feed sector.

Markets

Pigs: According to “Marché du porc breton” the market is described as stable to firm. On Monday, the 56 TMP basic price eased by €0.02 in the context of stable demand and reduced supplies.

Piglets: The European market remained low at the beginning of the week. Demand is stable and supplies are also very stable. The market is reported good for pork butchers and FNP-FNCBV prices. As a result, prices increased by €0.01 for 25kg pigs and €0.28 cents for post-weaning piglets.

Cuts: The end of the month is not a good time for pork consumption. However, with the imminent approach of June it is hoped the market will have improved by the end of the week, in spite of a weather forecast which is looking more like autumn.

Pork Prices RUNGIS Week Commencing 27 May 2013

Denmark

High Danish Earnings in Eastern Europe

The six leading Danish agricultural companies with Eastern European investments have earned nearly €135m (after tax) over the past five years in Eastern European countries. The companies have increased revenue by between 60% and 500% over the past five years, according to an industry survey. Almost €65m, or half of the total revenue, stems from the largest and most successful company, the Axzon subsidiary Poland Invest PLC, which produces pigs on huge farms in Poland and the Ukraine. Axzon has its own slaughterhouse in Poland, Poldanor. Poland Invest has increased both revenue and profit. Revenue increased, from €90m in 2008, to €147m in 2012 giving a bottom line profit of €31m. Virtually all the profit is reinvested annually. (Source, Berlingske).

Markets

On EU markets, fresh hams and loins have been traded at stable levels, while the trade for shoulders and manufacturing meat remains under pressure. For necks and tenderloins, trade has remained stable at similar price levels. The UK bacon market remains quiet with stable volumes being traded. For markets outside Europe, steady sales have been reported to China and Japan, while trade to Russia is improving. However, shipments to the Russian market remain lower than year-earlier volumes.

Danish Slaughterhouses - Payments Week Commencing 27 May 2013

Germany

Clear Overcapacity

Bank ABN Amro points out the overcapacity in the European pig slaughter sector, particularly in Germany. With stagnant or slightly decreasing consumption and production, primary processors find it hard to compete against players in Brazil and the USA which operate with higher margins. (Source, Boerderij Vandaag)

Minimum Wage

Niedersachsen, the major pig producing region of Germany is aiming to implement a minimum wage for the sector of €8.50 per hour. The German meat sector has been accused, as recently as April, by the Belgians of unfair competition by employing East European workers on low wages. (Source, Boerderij Vandaag)

IFFA Progress

The world largest meat technology fair that takes place every three years in Frankfurt attracted a record audience of 60,000 visitors from 142 countries. (Source, AFZ)

Pork Prices Hamburg Market Week Commencing 27 May 2013

Netherlands

Fall of Weaner Prices

The price of weaners has declined by €10 to €39 per head recently, driven by lower demand from Spain with export numbers falling from 16,000 to 1,500 per week. This follows exactly last year’s trend and a recovery is forecast. However, pig breeders are losing money at this level. (Source, Boerderij Vandaag)

Sustainable Pork Specification Unclear

Researchers from LTO and the pig producers’ association NVV are unclear on the way forward for sustainable pork. A rise in supermarket prices with a new specification is likely, but the question is how much? (Source, Boerderij Vandaag)

Belgium

Higher Pig Slaughterings

In March, slaughter throughputs were 5% higher compared with the same month in 2012 to 1.02m, confirming the growth of output since the beginning of the year. This follows a fall in production in 2012. (Source, Boerderij Vandaag)

Italy

Fiorucci in Good Form

Turnover at the major pork processor reached €220m in 2012. It exports 23% of its 40,000 tonne production to 60 countries. The group created in 1850 has four factories in Italy, and one in the USA employing 614 staff. It was bought by Campofrio in 2011. (Source, Mercato & Imprese)

YouTube Hit

Fiorucci has produced a fun video hit Potere e salumi viewed by 2.3m Italians, with the theme corruption and salami. A must see at http://www.youtube.com/watch?feature=player_detailpage&v=KH7mjy6zSXE

Spain

Pork Prices Barcelona Market Week Commencing 27 May 2013

USA

Curiosities

Among the latest niche developments in the USA, one must include peanut-fed pigs used for the production of smoked dry cured ham and cannabis-fed pork from Seattle where the drug is now allowed. (Source, various)

Dominican Republic

Dealing with CSF

With Classical Swine Fever (CSF) endemic in the country, the government plans to eradicate it over 18 months using a system of vaccination combined with the development of CSF-free zones. (Source, Ministerio de Agricultura)

Ukraine

Stable Prices Forecast

Arthur Loza, President of the Ukraine Pig-breeders Association, has forecast that slaughter pig prices should remain stable in the Ukraine throughout 2013 at between US$2.45 and US$2.58 per kg. He commented that, if Brazilian pork imports resume, the price could drop to US$2.33 per kg. Market conditions for the development of pig breeding are favourable due to the positive harvest forecast which will result in cheaper feed. The Association estimates Ukrainian pork production will total 750,000 tonnes in 2013 compared with 730,000 tonnes in 2012. (Source, Pigua.info)

Russia

Pig-Breeding Industry Keeps Breaking the Records

The production of pork in the corporate sector in Russia increased during the January-to-April period by 134,200 tonnes, or 30%, compared with the same period a year ago. The main driver for the increase has been the launch of new production facilities following the completion of many investment projects. At the same time, imported pork volumes remain high, despite being lower than year-earlier levels, totalling 310,000 tonnes during the four-month period. (Source, Pigua.info)

China

Casing-Hungry

With demand for sausages increasing fast, China is now the world’s largest market for natural and artificial casings. Viscofan, the market leader, opened a £27.8m factory last February near Shanghai. Local demand for sheep casings should maintain strong prices. (Source, Meat Trades Journal).

US Imports

Tianxin Livestock Breeding will import 1,200 GGP breeding pigs from the USA for its Hunan production. (Source, CN Agri)

Expansion in the West

Sichuan Giastar Group is developing a production base for 200,000 pigs and 200,000 broilers annually. Economic developments are increasingly focused in the poorer West of China with growth rates of 15-17% per year against 6-8% in the East. (Source, CN Agri)

Chinese Wholesale Prices Week Commencing 27 May 2013

June 2013

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