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AHDB Pig Market Weekly


21 October 2014

AHDB Pig Market Weekly - 16 October 2014AHDB Pig Market Weekly - 16 October 2014


AHDB

UK pig meat trade slower in August

In contrast to the trends recorded earlier in the year, UK imports and exports of pig meat were both lower than a year ago in August. Pork exports were 3% down on August 2013, at 14,600 tonnes. This was the first year-on-year decline since February. The drop was largely due to lower shipments to Ireland and Germany, although they remained the two largest markets during the month. The drop in exports to Germany was largely due to lower sow slaughterings on the back of falling cull prices. Most smaller EU markets took more UK pork, as did non-EU buyers; shipments to third countries were up by 21%. Among smaller markets, there was big growth in exports to the Philippines, Japan and South Africa. Strong sales to China and Hong Kong meant that offal exports were up by more than half compared with last August, despite less being sent to the rest of the EU.

UK imports in August were lower than a year earlier across all the main pig meat categories. This was despite prices being significantly lower than last year, mainly due to the strengthening of the pound against the euro. The average price of pork imports, £1,970 per tonne, was 9% lower than in August 2013 but volumes were still down 2%. A sharp fall in purchases from Germany was the main reason for the drop, with other major suppliers sending more pork to the UK. Overall, it was a similar story for bacon, with 4% less entering the UK than a year before, despite a 6% drop in prices. Germany again bucked the trend of other suppliers but this time its shipments rose, partly offsetting falls from Denmark and the Netherlands. Similarly, increased imports of German processed products failed to fully offset lower purchases from elsewhere. Sausage imports were also down overall but with trends varying between suppliers.

Producer share of retail price unchanged in September

Latest farmgate and retail price figures for September showed the producer share of the final pork retail price at 40%, virtually unchanged from a month earlier. This was a result of retail prices falling at a similar rate to the farmgate pig prices in September. However, during the month, the share received by the producers was three percentage points smaller than the same month in 2013. As such, the producer share has remained below last year’s level for the sixth consecutive month and was the lowest in just over two years. Bacon retail prices for September are not yet available but figures for August showed the producer share at 36%, down two points from a year earlier.


Pork retail prices in September were generally little change compared with August, with the exception of boneless leg (down 5%) and loin steaks (up 4%). However, the year-on-year comparisons showed a contrasting picture, whereby the majority of cuts recorded a decrease in retail price, with the expectation of loin chops which increased by as much as 15%. The largest price decline was recorded for boneless leg, which was down by 11% compared with September 2013. Retail prices for minced pork and loin steaks showed the smallest decline, down by 1%. There were some significant declines for other cuts, including traditional pork sausages (down by 9%) and fillet of pork (down by 7%).

UK pig prices

The EU-spec GB SPP resumed its downward trend, falling to 153.98p per kg for the week ended 11 October. This was almost 2p below the level a week earlier, with post-DAPP contract changes still adding volatility to the price. Pig growth over the last few months has been positive, meaning heavier pigs at slaughter, and supplies of pigs are generally rising in at the same time, although the slaughter estimate for the latest week was below last year’s level. This increased supply has contributed to finished pig prices remaining sluggish. The record gap between UK and EU prices also continues to have a part to play. The average carcase weight for the week ended 11 October was almost unchanged from the previous week, at 82.04kg. The probe measurement reached 11.5mm, the highest since the start of the year.

For the week ended 4 October, the GB APP rose marginally, by 0.30, to 158.44p per kg. During the same week, the SPP also increased slightly, to 155.62p per kg, maintaining a difference of almost 3p between the two price series.



For the week ended 11 October, the 30kg weaner price came down by 20p on a week earlier, to stand at £48.97 per head. This was partly due to some increase in quantities traded, according to industry reports. This meant the 30kg weaner price was over £5 lower than the same week in 2013. There was a similar trend in the 7kg weaner market, whereby the weekly average fell to £37.58 per head. This was a 30p change on the week before and £4 down on the same week last year.

EU pig meat production down in July

According to the latest figures published by Eurostat, EU pig slaughterings in July stood at 20.8 million head. This was only marginally down compared with the same month last year. For the year to date, throughputs showed almost a 1% decline compared with the first seven months in 2013. However, pig meat production in July was down by over 1%, at 1.8 million tonnes. This indicates, pigs were finished at lighter weights in July across the EU, so the fall in EU pig meat production was larger than the decline in throughputs. This continues the trend of the year so far, with output 2% lower overall, at 12.6 million tonnes.



During July, pig slaughterings in Belgium were down by 4%, while the EU’s leading producer, Germany, recorded a 3% decline. French throughputs fell by 2% compared with July 2013. However, these declines were largely offset by increases in some of the other key markets, including the Netherlands (up 24% as more Dutch pigs were killed at home rather than being exported), Spain (up 5%), Ireland (up 3%) and Poland (up 3%). August figures for most of the main pig producers are not yet published. Those which are, including France, Ireland and Belgium, show a mixed picture but with slightly lower throughputs overall. However, the overall EU situation will depend on figures from the remaining markets.

EU supplies set to be stable but prices low

According to members of the EU Commission’s working group on pig meat forecasts, which met yesterday, pig slaughterings across the EU are set to remain close to year earlier levels through the rest of 2014 and the first half of 2015. The group’s figures suggest a small year-on-year decline through the remainder of this year, despite census results from June showing a modest increase in pig numbers. Furthermore, throughputs in the first half of 2015 are forecast to be only marginally up on the same period this year. Most of the major producing Member States are forecasting little change in production levels. German output, for example, is forecast to track slightly higher than a year earlier, while Danish slaughterings may fall, despite higher piglet production, as weaner exports continue to rise.



However, the relatively tight supply situation may not be sufficient to provide much support to prices. Having previously had only a modest effect on prices, the Russian ban on imports of EU pork is now beginning to bite. With freezers and cold stores reported to be full of supplies which might previously have been sent to Russia, demand for slaughter pigs has fallen. The autumn was previously the peak season for exports to Russia and so a small year-on-year increase in pig numbers in September was enough to cause prices to start falling sharply. Further falls are anticipated, with the group forecasting that the EU average price during the last quarter of this year and the first three months of next year will be below €140 per 100kg. If realised, these would be the lowest quarterly averages since the final three months of 2010. Only a modest recovery is expected during the spring, with prices set to remain well below this year’s levels.
Further analysis of the forecasts and their implications for the EU market going forward will appear in next week’s Pig Market Weekly.

Feed market update

UK feed wheat futures prices (Nov-14) settled at £114.95/t on Tuesday, up £2.20 on Friday’s close but only £0.45 higher than last Tuesday. Provisional figures for the 2014 UK wheat and barley crops were released by Defra last week and indicated the biggest UK wheat crop since 2008, while barley output is only marginally lower than last year. The AHDB/HGCA Early Balance Sheets, released on Monday, estimate that total animal feed demand for cereals will be lower than in 2013/14, based on the assumption of ‘normal’ weather conditions, lower milk prices and ample forage availability. The October release of the USDA’s world supply and demand estimates was also out last week. There were noticeable increases to production for both EU wheat and maize, which added to the downward sentiment in the EU grain market.
World soyabean production was revised higher by 0.1Mt due to a slight increase to US yield levels. Oilseed prices found support at the beginning of last week, resulting from concerns of dry weather in some parts of Brazil impacting on newly planted crops. However, prices drifted down through the rest of the week. Rapemeal (34%, ex-mill, Erith, October delivery) was reported at £158/t on Friday, down £1 on the previous week. The Hi-Pro soyameal price (ex-store, East Coast, October delivery was unchanged again on Friday, at £318/t.
To read more about the latest developments in the feed market click here.

Shopper needs drive long term retail change

Over the last few years there has been much focus on the rise of Aldi and Lidl, the ‘hard discounters’, and the impact this is having on the ‘big four’ multiples. Looking at this and other retail trends over the past 40 years shows there is on-going structural change in retailing driven by changing shopper needs. Recent trends show that this process is continuing, perhaps even accelerating as new technologies increase the range of options available to consumers.
To read an article taking a brief look back over the past 40 years, demonstrating that the grocery market is continually evolving, click here.

EU meat production returns to growth

According to the EU Commission’s latest Short Term Outlook report, EU meat production is set to return to growth this year following two years of contraction. However, pig meat output is expected to decline again, following lower production in the first half of the year. Further growth in meat production is expected next year, with pork output rising for the first time in four years. More detail on the outlook for EU pig meat production can be found above. Expansion of the dairy herd in anticipation of the abolition of diary quotas is the main factor behind rising beef production. The rise of poultry meat is also forecast to continue, with it making up 30% of EU meat consumption for the first time this year. The Russian ban on imports from the EU is set to mean that less meat will be exported from the EU this year, with volumes stabilising next year.


The report also covers arable crops. It puts this year’s production at record levels; output of both cereals and oilseeds is forecast to be up 5% on last year’s harvest. A higher planted area for wheat and much better yields for maize mean production is well up and stocks are likely to grow, increasing the resilience of the sector if conditions are worse in forthcoming seasons. These increases were partly offset by lower production of barley, rye and oats. Oilseed production is forecast to be 5% higher on the back of higher yields for rapeseed, in particular.
To read the full report, click here.

Grain Market Outlook

AHDB/HGCA’s flagship Grain Market Outlook Conference took place in London on Tuesday. The conference looked at whether the industry needs to retune its perspective to respond to long-term influences motivating world markets. Four speakers presented on the outlook for grains and oilseed markets, the importance of Ukraine in global grain markets and the European ethanol market. Videos of the presentations from the event will also be available from the HGCA website in the next few days.


The conference also saw the launch of a new daily publication on the cereals and oilseeds market. The AHDB/HGCA Grain Market Daily will be published at lunchtime from Tuesday-Friday, with the existing weekly Market Report still being published on Monday. For further details and to subscribe to the Grain Market Daily, click here.

DOWNLOAD REPORT:- Download this report here

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