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QMS (Quality Meat Scotland)

19 August 2014

QMS Monthly Market Report - August 2014QMS Monthly Market Report - August 2014

QMS - Quality Meat Scotland

Prices and Supplies

The downwards trend in pig producer prices that emerged in June accelerated through July. Both the GB DAPP and SPP1 have fallen back significantly in recent weeks, sliding by 4p/kg over a five week period ending August 2. At 159.6p/kg dwt, the GB DAPP fell below the 160p/kg mark for the first time since the second week of April 2013, and traded 5% lower year-on-year.

Following May’s 2.5% annual increase in prime pig slaughterings at UK abattoirs, the June kill showed a faster rate of expansion, rising more than 3.5%. Throughput lifted to 771,700 head compared with a June 2013 total of 744,300 head. The average weekly kill reached a 3-month high of 192,900 head, contrasting with the historic trend which has usually seen this slip to an annual low in June.

There was a further seasonal decline in the average carcase weight of prime pigs slaughtered at UK abattoirs during June. The average pig weighed 80kg; down 0.4kg on the month and 1.2kg lower than the historic peak reached back in January and February. Nevertheless, it remained well above its year earlier level of 78.2kg. Combined with the increase in throughput, this pushed prime pigmeat production up to 61,750t, 6% ahead of last year.

June 2014 was the first month since slaughtering finished at Broxburn in October 2012 that the prime pig kill exceeded its year earlier level at Scottish abattoirs. Throughput increased by 7.5% to 24,100 head. In the final week of June, slaughter numbers reached their highest of the year to date, totalling nearly 6,150 head. The weekly average kill surpassed 6,000 head for the first time since November.

Kantar Worldpanel household consumption data for pork continued to show a subdued market in the 12 weeks to June 22. The volume retailed was 2% lower than in the same period of 2013 despite pork becoming a less expensive protein with the average price decreasing by 1.5%. Drilling down into the data shows some switching between cuts of pork. Indeed, while the overall decline was largely driven by lower sales of chops and steaks (down 8%), sales of leg and shoulder roasts were flat, and the volume of loin roasts purchased increased by 6%. The shift towards pork loin came despite its position at the more expensive range of pork cuts plus a slight annual increase in price.

Weaner prices remained on a level trend that has seen the market clear at between £55 and £58 per head since the turn of the year. At the end of July, the average price stood at £56/head, up nearly 4.5% on the same week last year. However, the 7kg weaner market cooled in July, trading at around £40 a head, compared with £41 a head in June.

UK abattoirs produced a total of 64,500t of pigmeat during June. This compared favourably with the 61,100t of output a year earlier. The 6% rise in prime pigmeat production was partially offset by a 6% decline in sow meat production, leaving overall output 5.5% higher.

The average price for a grade E pig across the EU fell sharply in July, sliding from an eight month high of €1.75/kg dwt in the first week of July back to €1.64 in the week ending August 3. This was its lowest level since late May. Compared to the same week last year the average was down by 12%. The GB average, at €1.95/kg dwt, was nearly 19% higher than the EU average compared with 13% at the beginning of July and just 1% as August 2013 commenced. Currency movements have added to the loss in price competitiveness of UK pigs, with the UK average running 3% ahead of last year’s levels in euro terms but nearly 6% lower when quoted in sterling.

During July, the largest price decline of 14.5% came in Holland while grade E German and Belgian pigs became 8-9% cheaper. Meanwhile, prices fell 5-7% in Denmark, Austria and Poland; and by 3.5% in Ireland. There were smaller declines of 1% in Spain and 2% in France, matching the UK euro terms decline. Just 3 countries saw a rising market during the month - Sweden, Romania and Greece.

Compared to a year ago, pig producer prices are much lower in most member states, led by Belgium, down 15% and Holland, down 19%. There have also been double-digit declines in Spain, France, Latvia, Lithuania and Poland; and 9% declines in Denmark, Germany and Austria. In only the UK, Ireland and Bulgaria are prices higher than a year ago in euro terms (up 3%).

Following the weak export growth of April (1%), UK pigmeat sales to overseas markets jumped in May, rising 16% year-on-year to 17,250t. Growth was driven by shipments of fresh and frozen pork which were up nearly a fifth, while bacon & ham sales fell back by 21% to just over 1,000t and accounted for just 6% of total pigmeat exports.

Increased trade in pork with China & Hong Kong, Holland and Denmark offset lower sales to Ireland and Germany. While the former were up by around 50% year-on-year, the latter were approximately 10% lower. The largest single market during May was China, taking delivery of 2,650t of pork; 16% of the total. Germany was the second largest with 2,400t and a near-15% share.

The UK imported 51,300t of pigmeat during May 2014. Although 4.5% higher than in the same month of 2013, deliveries fell short of their May 2012 level. Breaking down pigmeat imports shows that pork imports increased by 1% year-on-year in May to 30,500t; their slowest growth since declining last November. Meanwhile, imports of bacon & ham were up by more than 10% at 20,800t. This meant that bacon & ham accounted for 40.5% of pigmeat deliveries for a second consecutive month. This was around 1 percentage point below their average share in the January to May period but up 4 percentage points from May last year.

Overall imports of pork edged higher despite the three largest suppliers to the UK all delivering less. Trade with Germany, Denmark and Holland fell 1%, 5% and 8.5%, respectively. The difference was covered by rebalancing towards product from France, Belgium, Ireland and Spain.

Growth in imports of cured pigmeat came mainly from Denmark and Germany with deliveries rising by 30-40% year-on-year to reach 10,150t and 2,650t, respectively. This more than offset a 15% decline in volumes arriving in the UK from Holland. Imports from Holland slipped to a 9-month low of 6,900t.

News Round up

Ex-farm new crop feed wheat and barley prices traded well below last year’s levels in the opening week of August. In North East Scotland, wheat traded at £113/t while barley could be purchased for £92/t. In the same week last year they had traded at £166/t and £132/t, respectively. Current market conditions have therefore seen prices slide by nearly a third over the past year. Beneficial growing conditions across the northern hemisphere have boosted crop production, placing pressure on the market. It has been a similar case on the soyameal side with record global soyabean production forecasts lowering prices by 20-25% relative to a year ago. Currency movements will also have benefitted feed buyers in the UK. Not only will a strong pound have reduced the cost of importing soyameal, but it will also have made UK wheat and barley exports less competitive, thereby lowering export demand and placing further downwards pressure on prices.

The German pig census carried out during May of this year showed an expansion in the sow herd. Numbers increased by 19,700 head on the year (1%), reaching 2.075m head. This was despite a decline in the number of holdings keeping breeding pigs, implying a concentration of the herd amongst larger farms. Indeed there were 197 sows on the average holding with breeding pigs in May 2014, up from 188 in November 2013. Although the sow herd increased in size, it was still 4.5% smaller than it had been two years earlier, prior to the EU ban on sow stalls. Despite the sow herd expanding, the total number of fattening pigs fell by 1% to 12.029m head. However, there were 8% more pigs on the ground in the 20-50kg weight category, suggesting a contraction in the live export of weaner pigs. The number of piglets (less than 20kg) increased in line with the sow herd, up 1%.

African Swine Fever (ASF) is becoming a growing issue in the Baltic States. Between July 22 and August 4 there were 22 separate outbreaks reported to the World Organisation for Animal Health (OIE) by Latvia. Of these cases, ten were discovered on pig farms and 12 in wild boar. While initially the outbreak had affected areas close to the border with Belarus, and were linked to cross-border movements of infected wild boar, 4 of the cases in late July were on farms in Valka County, on the border with Estonia, more than 150 miles from the regions bordering Belarus. In total, 16 pigs and 18 wild boar have tested positive for ASF in Latvia. 5 of these pigs and 11 of the wild boar have died due to ASF while a further 64 pigs and 7 wild boar have been culled. Meanwhile, the deaths of two wild boar from ASF in Poland were reported to the OIE in late July. The largest outbreak of ASF in the EU was reported to the OIE on July 24. It was on a large farm in Lithuania, owned by a Danish company, and located around 20 miles from the border with Belarus. All 19,411 pigs on the farm tested positive. As a consequence, Lithuanian authorities implemented a 3km protection zone within a 10km surveillance zone around the farm which includes control measures such as a ban on all pig movements and a census of all pig farms. Investigations are being carried out into how the pigs contracted ASF.

While the recent Russian ban on imports of meat will have no direct effect on EU pigmeat trade given that a ban has already been in place for six months, it may be felt more significantly across the Atlantic. US trade figures for Q2 2014 showed that Russia accounted for 4% of US pork export volumes compared with just 0.75% a year earlier as a relaxation of import controls had seen trade pick-up again having been heavily curtailed in 2013 due to the presence of residues of the feed additive, ractopamine, in US pigmeat. However, excluding trade with Russia, US pork exports were up 1% year-on-year in June so there would appear to be no shortage of alternative overseas customers for US exporters, particularly given the tightness of domestic supplies. However, for Canada, the ban may have more impact given that the value of pork exports to Russia expanded by 143% yearon- year during the first half of the year to C$268.2m (£146m), and accounted for 17% of total overseas pork receipts. This made Russia the third largest buyer of Canadian pork behind the US and Japan.

During June 2014, Brazil exported 44,000t of pigmeat. This was up 8% on the year. However, with the average price per tonne rising by 57% year-on-year in dollar terms to $3,800/t (£2,100/t), sales generated a 70% higher monetary value than in June 2013, reaching $167.25m (£99.5m). In the first half of 2014, Brazil exported 235,900t of pigmeat. Although the volume exported in the first six months was lower by 2% year-on-year, the average price was 13% higher, meaning that export revenues rose by 11% to a total of $698.9m (£415m). The growth in average price came only in May and June; indeed, prices had been little different in the opening third of the year.

August 2014

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