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QMS (Quality Meat Scotland)

17 September 2014

QMS Monthly Market Report - September 2014QMS Monthly Market Report - September 2014

QMS - Quality Meat Scotland

Prices and Supplies

Deadweight prime pig prices continued to cool through August. Both the GB DAPP and SPP2 fell by around 2.5p/kg during the four weeks of August having declined by 3p over the previous four weeks. This left the GB DAPP at 157.5p/kg dwt in the final week of August; down 6% year-on-year. However, since late March 2013, the last time the DAPP was at this level, feed grain and soyameal costs have fallen by around 45% and 10%, respectively.

At 969,800 head in July, prime pig throughput at UK abattoirs exceeded its year earlier level by 4,900 head or 0.5%. This signalled a slower expansion of supplies than in the previous two months when numbers had risen at annual rates of 2.5% and 4%. Nevertheless, numbers still reached a 12-year high for July. Supplies continued to build seasonally, with the average weekly kill edging up to a 4-month high of 194,000 head. Throughout much of August, BPEX estimates placed GB slaughter numbers considerably higher than last year.

Although the average carcase weight at UK abattoirs declined for a seventh straight month, at 79.5kg in July, it was still more than a kilo higher on the year. As a consequence, the 0.5% increase in throughput turned into a 2% rise in UK prime pigmeat production. Volumes reached 77,100t.

For a second consecutive month, Scottish abattoirs slaughtered more prime pigs than a year earlier. July throughput totalled 28,550 head. Although the average weekly kill dropped by 300 head from June to 5,700, supplies picked up as July progressed, exceeding 6,000 head in the final week of the month.

GB household consumption data from Kantar Worldpanel indicates that pork sales volumes increased in the 12 weeks to July 20. This marks a turnaround from earlier in the year when volume sales had been holding below 2013 levels. The boost to sales came despite GB households spending less money buying pork as the average price was nearly 4% lower on the year. This change in the average price is partly a reflection of a shift in consumption patterns away from chops and steaks, which were more expensive to buy than last year, towards mince and roasting joints, which were more commonly sold on promotion. There was also a slight rise in the volume of bacon sold to GB households in the 12 weeks to July 20. Sales volumes rose by 0.5% as higher prices partially offset a 2% rise in expenditure. However, purchases of ham were more subdued with higher prices pushing consumption volumes 0.5% lower.

After trending broadly flat for 9 months at between £55 and £57 a head, weaner prices declined during August, trading between £51 and £55 a head. As a consequence they fell behind year earlier levels for the first time since the end of September 2012. Meanwhile, the 7kg weaner market cooled for a second month, with prices averaging around £38-£39 a head in August compared with over £40 in July and £41-42 in June.

Pigmeat production at UK abattoirs during July exceeded its year earlier volume by 1.5%. Although the volume of sow meat produced fell by 7%, it did not fully offset the 2% expansion of prime production. Overall output totalled 80,400t; 96% of which came from prime pigs.

After declining sharply through July, EU prime pig prices held relatively steady through August. Having opened the month at around €1.65/kg dwt, the average Grade E price edged up in the first half of the month before slipping back to €1.64/kg as August drew to a close. In terms of the key markets, prices edged lower in France, Holland, Poland and Spain; flat-lined in Denmark; but picked up slightly in Germany. UK prices therefore regained some competitiveness as prices slipped by 3.5c/kg during the month to €1.92/kg dwt (152p/kg).

In 2013, the EU pig market had peaked in the final week of August at €1.95/kg dwt; 16% higher than its August 2014-ending level. Most of the large pig producing nations have seen declines of 15-20% over the past year. However, UK prices are flat when looked at in euro terms; highlighting the loss in competitiveness. Furthermore, when converted into sterling, the average decline for EU prices moves to 22%.

For a second successive month, UK pigmeat exports exceeded year earlier levels by 16%. Overall volumes reached 16,750t with pork shipments up 17% at 15,300t and bacon & ham shipments up 14.5% at 1,400t.

In terms of pork sales, exports to Denmark and Hong Kong led the way, rising by approximately 60% year-on-year. There was also a 13% increase in shipments to Holland while the Chinese and Irish markets were up by 5% and 7% respectively. By contrast, the largest market for UK pork in the first half of the year, Germany, took 12% less in June 2014 than in the same month last year.

Although the UK imported 3.5% less pork than a year earlier during June, 11% more bacon & ham was brought into the country, meaning that overall pigmeat imports rose by 2%. Deliveries totalled 50,400t; a threeyear high for the month. Bacon & ham accounted for 41.5% of total deliveries compared with less than 38% in June 2013.

Pork imports were driven lower by a onethird decline in shipments from Denmark and smaller decreases in imports from Germany and Holland; the UK’s largest suppliers. These declines were partially offset by increased trade with Spain, France, Belgium and Ireland.

Though less pork came into the UK during July from Denmark and Germany, significantly higher volumes of bacon & ham were delivered. A quarter more came from Denmark and 12.5% more from Germany. However, there was a slight fall in imports from Holland.

News Round up

Having slid through August, ex-farm feed wheat prices in North East Scotland then picked up as September began, trading up £6/t on the week at £116/t on September 3. By contrast, feed barley fell back £5/t to a 4-week low of £93/t. Higher wheat prices may well be linked to signs of an escalation of the unrest in eastern Ukraine. Nevertheless, with the International Grains Council revising up its forecast for 2014/15 global wheat production, the market remains well below year earlier levels of £158/t for wheat and £128/t for barley. Prices in the EU have been held down by higher production but lower exports. Meanwhile, soyameal prices steadied in late August/early September having risen for five weeks from their mid-July low. Hi-pro soyameal traded at £340/t in the week ended August 30; up £30/t from 6 weeks before but nevertheless down £77/t year-on-year. At the global level, downwards supply-side pressure has been offset by rising Chinese imports.

Vietnam recently opened its market to Irish pork. 5 Irish abattoirs and a cutting plant have been granted access for fresh and frozen pork. During August, the Philippines also agreed to permit pork imports from 39 pig processing plants in the Irish Republic. In the first five months of 2014, EU28 pork exports to both countries grew considerably year-on-year. Deliveries to the Philippines increased by 68% to 28,800t while exports to Vietnam quadrupled to 1,250t. These markets are relatively low value with the average value per tonne around €1,350 (£1,080) to the Philippines and €875 (£700) to Vietnam. This indicates that Irish processors will use these new outlets to achieve a greater balance of the carcase, by selling products that are less valued by European consumers.

The Danish pig census for July showed an expansion in the sow herd. Numbers increased by 17,000 head on the quarter and by 15,000 head on the year to 1.043m; gains of 1.5%. Looking forward, the data suggests further increases in the sow herd with slight quarterly and annual increases in the number of gilts retained for future breeding to 195,000 head from 193,000. A consequence of the larger sow herd was more piglets; numbers stood at 2.595m head at the beginning of July, compared with 2.551m in April and 2.491m in July 2013. This works out at a quarterly increase of just over 1.5% and an annual increase of 4%. There was also an increase in the number of weaner pigs on Danish farms. Numbers were up 3% on both the quarter and year at 5.519m head. However, there were fewer slaughter pigs on the ground with numbers slipping by 1% on the quarter and by 2% yearon- year to 3.095m head. With more weaners but fewer slaughter pigs, it suggests that live exports have been falling back over the past year.

In the final week of August, Canadian abattoirs slaughtered 387,100 prime pigs; 1% lower year-on-year. This compares favourably with the January to August period, during which abattoir throughput was 2.5% lower at 12.5m head. Though slaughter numbers were down, production volumes increased as much lower feed costs encouraged producers to add weight. Indeed, the average carcase weighed 99kg compared with around 95kg in the same period of 2013. Consequently, total pork production rose by just over 1% in the first 8 months of 2014, reaching 1.24m tonnes.

Although US pig producer prices increased by 3% in the first week of September to trade up 7% year-on-year, this came after significant declines through much of July and August. Indeed, at the end of August, prices had fallen to a 6-month low of $2.02/kg dwt (122p/kg dwt), having recently peaked at $2.86/kg (167p/kg) in the week ending July 12. This meant that prices had fallen by 27% in just 7 weeks. In addition to weaker seasonal demand, the change in the market appears to have been driven by supplies turning out to be better than feared. Back in the spring, market analysts had been forecasting that US pig production could be down by as much as 10-15% due to the major outbreak of Porcine Epidemic Diarrhoea virus (PEDv). However, in the year-to-date slaughterings are down by a much lower 5% at 70.71m head. Moreover, heavier carcases have meant that pork production is just 1.5% lower at 6.865m tonnes. However, at the beginning of September, respective weekly declines of 10% and 6.5% in slaughterings and production saw prices move higher once again.

2 The SPP (Standard Pig Price) is based on a sample of standard pigs killed at GB abattoirs. Standard pigs are defined as those where no explicit premium is paid for a specific attribute other than weight and grade. Examples of specific attributes would include organic production systems and breeds. The SPP price is taken before deductions for transport, insurance and levy and does not include bonus payments. The DAPP will no longer be published from the beginning of October and QMS will thereafter quote the SPP to reflect developments in the market for prime pigs. As can be seen in the pricing chart, it has closely matched the DAPP ever since it was first calibrated at the beginning of April. The SPP sample has generally been around 30-40% larger than the DAPP sample.

September 2014

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