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QMS (Quality Meat Scotland)

30 January 2014

QMS (Quality Meat Scotland) - January 2014QMS (Quality Meat Scotland) - January 2014

QMS - Quality Meat Scotland

Prices and Supplies

Producer prices for pigs have followed a seasonal downwards trend early in the New Year. With consumer demand traditionally sluggish in January, it tends to place downwards pressure on the market. The GB DAPP traded at 167.3p/kg dwt in the week ended January 18th, down 4p/kg on the month but still up by 4.5% on the year. It should be noted that in the third week of the year Cranswick, a major pig processor, stopped reporting prices and the resulting adjustment in the sample may have added momentum to the weekly decline of 1.7p/kg.

UK abattoirs slaughtered fewer clean pigs than a year earlier for a second month in December. Throughput fell 1% to 758,300. Nevertheless, in the year as a whole, slaughter numbers held just ahead of 2012 levels, rising by 12,500 head (0.1%) to 10.047m.

There was a seasonal decline in carcase weights in December, falling by 1kg to average 79.2kg, matching the annual average. The likely driver of the decrease was the short kill weeks of the festive period which meant that slaughter was brought forward to earlier in the month, meaning pigs will have been slaughtered younger, and hence lighter, than in November. However, due to favourable growing conditions and lower feed costs, the monthly average carcase weight remained 1.5kg higher than 12 months before. As a consequence, the volume of meat produced from clean pigs increased by almost 1% year-on-year to 60,000t.

The December prime pig kill at Scottish abattoirs was down by approximately 450 head on the year at 22,850. This gave a weekly average figure 1% below the annual average of 5,750 head. However, pigs were pulled forwards due to the short Christmas week and the second week of the month saw the highest slaughter of the year with throughput reaching close to 6,900 head.

The autumn recovery in pork sales continued through November. Kantar data for the 12 weeks to December 8th showed a 5% increase in the volume retailed. This increase was helped by a slower pace of retail price inflation as prices averaged only 1% higher than in the same period of 2012. Shoulder roasts, chops and steaks proved particularly popular. However, bacon sales continued to come under pressure as consumers responded negatively to higher prices. Sales volumes subsequently fell 6% on the year.

In late October the method used to calculate the GB average price for 30kg weaner pigs changed and since then there has been considerable volatility from week-to-week. In the week to January 18th prices averaged £55.70/head, down £1.15 on the week but level on the month and up by 20% on the year. Meanwhile, sales of 7 kilo weaners netted an average of £43.40/head. This was up by £1.40 on the week but prices have been relatively stable since first reported at the end of October.

Industry sources suggested that sow prices edged higher in mid-January as export opportunities improved slightly. Prices are believed to have averaged just below £1 a kilo deadweight. At this time last year prices were sliding due to weak demand on the continent, so a steady market is an improvement.

During December, the UK produced 62,500t of pigmeat. This was 0.5% higher than in the final month of 2012 as increased output from prime pigs offset a 9% decline in sow meat. Annual pigmeat production rose by 1% to 832,900t; a thirteen-year high.

Although the average EU price for a grade E pig steadied in the week to January 19th, it had been sliding in late December and early January, leaving it 33c/kg off its peak reached in the first week of September. At €1.62/kg dwt, prices were 4.5% lower than in the corresponding week of last year. With prices falling back significantly in most of the large players, UK prices have lost competitiveness since the autumn and are currently valued around 20% above the EU average. Of the major producers, just Italy has seen a recovery in recent weeks.

The UK exported 16,100t of pigmeat during November. This was an 8.5% increase over the same month of 2012 when shipments had totalled less than 14,900t. Fresh and frozen pork exports reached a new record for November of 15,300t and were up by 7.5% year-on-year. Meanwhile, a quarter more cured product left the UK than 12 months before with deliveries rising to nearly 850t. However, this was still more than 70% lower than the November 2011 total.

While shipments to China hit a new record, this was offset by lower sales to Hong Kong. In terms of EU destinations, less pork was sent to Denmark and Germany; more to Ireland, Holland and Sweden.

Following two months of import growth, the UK bought less pigmeat from overseas than a year earlier during November. Total deliveries of 54,550t were 3% lower as rising imports of cured product (+5%) were offset by a sharp fall in fresh and frozen pork (-9%). This shift towards cured product meant that it took a 44% share of the total compared with 40% a year earlier.

The overall shift from pork to bacon and ham was reflected in trade with the UK’s largest supplier of pigmeat, Denmark. Holland sent less of both types of product while the opposite was true for Germany.

News Round Up

The early weeks of 2014 have seen significant downwards pressure on feed wheat and barley prices. On January 22nd, farmgate prices in the North East of Scotland were around £10 lower than in late December. Feed wheat traded for £157/t and barley was valued at £126/t, with the continued margin between the two reflecting relatively abundant barley supplies. Prices were last at these levels towards the end of September; and compared with the same time last year, they are £60/t cheaper (30%). The soyameal market has also opened the year lower with spot prices at £370/t compared with £385/t in December. Record levels of soyabean crushing in the US have led to the build-up of a surplus and prices have subsequently eased back.

Danish Crown has closed two pigmeat processing plants in Denmark, resulting in nearly 500 redundancies. The plants de-boned carcasses and produced ready meals. The closures come as part of a significant restructuring of the business, which is aiming to lower its fixed costs by removing excess capacity. Another plant closed in the summer of 2012 and cost-cutting measures are expected at another two processing plants with a further 350 job losses possible. Danish Crown offered its 6,000 workers guaranteed employment for 4 years if they accepted a 6.4% wage cut, but this was not supported in a ballot of union members.

In the first nine months of 2013 Holland exported 527,500t of pigmeat. This was a 6.5% year-on-year decline and was driven by lower sales to other EU Member States. Indeed intra-EU sales fell more than 8% to 428,500t. The largest decline was in sales to Germany which were down 15.5% to 73,500t, while the UK bought 14% less pigmeat from Holland than a year earlier with sales down to 43,200t. Sales to its largest customer, Italy, fell 6% to 90,000t. In contrast to subdued sales in the EU, Dutch processors did find increased opportunities further afield with export sales outside of the EU up 2% to 99,000t. Exports were boosted by strong demand from Russia which bought more than 20,000t compared with just 6,000t in the same period of 2012. However, shipments to Asia declined significantly.

During 2013 US abattoirs slaughtered more than 112m prime pigs. Although this was down by nearly 1% from 2012, total pigmeat production was only marginally lower as carcasses were heavier. Moving into 2014, pigmeat production is running significantly behind year earlier levels in early January. Indeed, while the US produced 533,650t in the first three weeks of the year, this was 7% lower than in the same period of 2013. Slaughter numbers were back 9% year-on-year at 5.52m head but this was partially offset by increased carcase weights, helped by lower feed costs and greater feed availability. In the Midwest regions of Iowa and southern Minnesota, the average pig weighed 128kg prior to slaughter; 2% heavier than in January 2013. Despite tight supplies, farmgate prices for pigs traded down 6.5% year-on-year in the week ended January 20th. Prices averaged $1.70/kg dwt (£1.05/kg dwt).

A recent report from Rabobank, a Dutch Bank, highlighted the changing patterns of meat consumption in China. It found that pork consumption had fallen back from around an 80% share of total meat consumption in 1985 to 65% in 2011. In part this was down to perceptions of greater health and environmental benefits from beef and sheepmeat. However, with significant economic changes taking place, households are shifting away from using fresh meat in home-cooked meals towards processed products such as ham and sausages due to increasing pressures on their time. Increasing affluence is also leading to strengthening demand for value added products. As a consequence, while meat consumption volumes are expected to rise at an annual rate of 2%, annual sales value growth of 10% is more likely. A further point covered in the report was that due to traceability concerns, supermarkets are slowly winning market share from street stalls.

January 2014

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