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AHDB Pig Market Weekly


14 November 2013

AHDB Pig Market Weekly - 14 November 2013AHDB Pig Market Weekly - 14 November 2013

The growth in global pig meat production is expected to continue, according to forecasts published by USDA last week, with output expected to reach 108.9 million tonnes in 2014.

AHDB

This would represent a 1% increment compared with the estimate for this year and is 3% up on 2012. As expected, growth will largely be driven by China, with the country projected to account for over half of the world’s pig meat production for the first time in 2014. Rising incomes in China have driven the desire for a more protein-rich diet and therefore higher demand has encouraged production over the last few years. In spite of poor returns, government subsidies on sows have helped Chinese farmers to expand production.

Away from China, 2014 pig meat production in the majority of the key countries is set to record a modest increase compared with 2013. This is largely based on expectations of lower feed costs in the coming year. The US is the third largest pig meat producer and output is likely to increase on higher slaughter rates and heavier carcase weights. Production in Brazil is also expected to rise marginally on the back of better producer returns. In Russia, the government’s pork support programme, designed to subsidise interest rates on investment in hog production, is likely to boost output. In contrast, recovery of the South Korean pig industry may come to a halt with a likely decline due to a smaller breeding herd following profitability issues. A share of the increased global pig meat production is likely to be translated into higher global trade, with stronger demand expected, particularly from some Asian markets.

The full USDA report can be downloaded by clicking here.

Tight supplies across the EU in August

Latest figures for August record a 6% year-on-year decline in EU pig slaughterings, to 19.2 million head. Part of the annual decline is a result of an additional working day in August 2012 compared with the same month this year but even allowing for this, the trend was downward. The year to date figures showed a similar trend but throughputs declined at a slower rate of 2% compared with the January to August period in 2012. Carcase weights in the eighth month were little changed from the previous year. As a result, pig meat production in August was down by the same amount (6%) to 1.68 million tonnes.

There was a contraction in production in most member states during August. One exception was Poland where output came up by 3% on the year, following a particularly sharp fall in August 2012. Production in the Netherlands continued to decline in double digits, by far the largest drop amongst the major member states at 12%. A year-on-year decline of 9% was recorded in Ireland, while production in Spain and France decreased by 8% compared with August 2012. Germany, the largest pig meat producer on the continent, published a 6% drop and Danish throughputs were down by 7%. Provisional data for September and October show different trends amongst the key pig producers, with German volumes similar to last year’s levels but lower throughputs continuing in Denmark and the Netherlands.

UK pig prices

The DAPP fell marginally again for the week ended 9 November, to 171.97p per kg. This was a week-on-week change of 0.06p per kg. This is not the typical trend as pig prices often record an upward movement approaching the early winter period. As a result, the annual difference in finished pig prices has narrowed in recent weeks, to currently stand at 12p per kg. The weekly estimated slaughtering totalled 173,100 head, marginally higher than a year earlier. Along with prices, carcase weights also came down marginally, to 80.41kg, but this meant that the pigs were still over a kilo heavier compared with the same week in 2012.

Following the dip in the finished pig market, the price of an average 30kg weaner also edged down to £55.34 per head for the week ending 9 November 2013. However, weaner prices remain at a historically high level. While the weekly price came down by 60p per head, the yearly increase still stood at £11 per head. On the other hand, the average price of a 7kg weaner increased to £43.40 per head for the same week. This was an increment of 80p per head. A stronger 7kg weaner market may indicate expectations of an improving market in the spring, when these pigs will be finished.

Further small decline in Danish breeding herd

Provisional figures from Statistics Denmark indicate a national herd of 12.26 million pigs on 1 October 2013. This was 1% below the herd size at the same time last year but roughly equal to the level three months earlier. The breeding herd declined by 1% on the year, having shown some stability earlier, totalling 1.23 million head. Although a rise in the number of in-pig gilts helped offset the falling numbers of in-pig sows, the number of maiden gilts showed its largest decline in 15 months, falling 6% year-on-year. If producers are deciding not to bring in new gilts, then it suggests that confidence is still fragile and there is no sign of any expansion in the immediate future.

Piglet and weaner numbers were stable, suggesting a slight productivity increase, which could help hold production up with fewer sows. However, there were 3% fewer slaughter pigs compared with 2012, reflecting the high level of weaner exports to Germany and Poland, where finishers can offer better prices for weaners. However, weaner export levels may have peaked, suggesting that there may be future increases in slaughter pig levels once more. However, the size of the breeding herd will likely prevent slaughter pig numbers from rising much above 2012 levels in the medium term.

Contrasting trends in French imports and exports

Pork exports from France fell marginally between January and September this year compared with the previous year. This was largely a consequence of lower production for the year so far. At 352,500 tonnes, exports were 4% below 2011 levels. Over three quarters of the exports were destined for the EU market and these shipments fell by 2%. Italy maintained its position as the primary market, while shipments to the UK recorded a 3% decline year on year. There was a substantial increase in exports to Spain, given lower production there, while purchases of French pork by non-EU markets came up by 5% on the year. The third quarter figures portrayed a more positive picture, whereby significantly higher import demand from Russia meant that overall exports increased by 3% on the year.

In contrast to the export market, at 273,300 tonnes, French pork imports strengthened by 3% compared with the nine month period in 2012. Spain is by far the largest supplier to France and imports from the country were up by 2%. Germany, Belgium and the Netherlands also increased volumes but Danish supplies were lower. The overall import position was similar for the July to September period but German supplies came down by 8% on the year. Given that the fall in production was compensated by lower exports, increased imports may indicate some recovery of consumer demand on the French market.

Feed market update

The Nov-13 UK feed wheat futures price closed marginally higher over the week on Tuesday at £164/tonne. The Dec-13 Chicago maize futures price also increased over the week (by 2%) and closed on Tuesday at $170.18/t (£107.02). However, this is compared to the previous Tuesday’s close which was the lowest since August 2010. Although the US 2013/14 maize crop was revised higher than the September forecast in last week’s USDA report, it was below market expectations, with a reduction in harvest area partly offsetting higher yields. As forecasters continue to confirm a recovery in grain production for the 2013/14 season, there is the likelihood that prices will be on a downward trend, unless a drastic weather event threatens the South American or Australian crops.

The Dec-13 Chicago soyameal futures price closed at $471.46/t on Tuesday, a considerable increase on $432.98/t a week before. In the UK, the Hi pro soyameal (Ex-store, East Coast) price for November delivery was £362/t as at 8 November, down by £13 on the previous week but the latest price was reported as ‘After Safe Arrival’. The rapemeal (Ex-mill Erith) price for November delivery also declined over the week by £4 to £202/t, as at 8 November.

To read more about the latest developments in the feed market, click here.

Producer share of retail price edges up in October

The average farmgate pig price in October reached a record 171.9p per kg, up almost 2p per kg on a month earlier. In contrast, the average retail price during the same month fell marginally. As a result, the producer share increased from September, to stand at over 43%. This was an increment of almost 2% compared with the same period in 2012 and represented the highest producer share since the mid-1990s. The average bacon retail price for October is not yet available but the producer share in September stood at 38%. This was 1% up on the same month last year.

The month on month change in retail pork cut prices recorded a few decreases, as the boneless leg price fell by 2% while loin steaks and loin chops were both down by 1%. Boneless shoulder and minced pork increased by 3% and 2% respectively, while fillet end leg and fillet of pork increased by 1% on the previous month. Retail pork prices were generally higher when compared with October 2012. On average prices were 4% above the previous year’s level. The largest year on year increment was recorded for boneless shoulder (up 8%), followed by a 7% rise for diced pork. Fillet of pork and loin chops increased by 5% and boneless leg and minced pork came up by 4%. There were smaller increases for other cuts, which included fillet end leg, loin chops and traditional pork sausages.

Compound pig feed production still lower

According to latest figures from Defra, third quarter production of compound pig feed was 2% lower than in the same period last year, the second straight quarterly drop. However, at 417,000 tonnes, production was a little higher than in the second quarter of this year. Breeding pig feed output was lower on the year for the third successive quarter, falling by 6%. Production of finisher feed was also down on a year earlier, as was starter/creep feed but the amount of grower feed produced was 1% higher. The lower volumes suggest that the impact of last autumn’s decline in the breeding herd is still being felt and there are no clear signs of recovery.

Overall production of compound animal feed remained higher than last year, with a 2% increase overall and 4% rises for both poultry and sheep feed. As expected, use of oats and maize in animal feed was much higher than a year earlier, up 26% and 40% respectively. Use of barley was only slightly higher than last year, although by September volumes were well up. The amount of wheat used was also a little higher than a year before, while cereals by-products were up 7%. Use of most oilseed meals/cakes was lower than last year, although only marginally so for rape meal/cake.

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