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AHDB Pig Market Weekly


12 February 2015

AHDB BPEX Pig Market Weekly - 12 February 2015AHDB BPEX Pig Market Weekly - 12 February 2015


AHDB

More of the same in 2015?

Latest AHDB/BPEX forecasts for UK pig meat supplies were launched at the AHDB Outlook Conference on Wednesday. They suggest that the supply situation in the year ahead will be similar to that experienced during most of 2014 and the market direction will depend on how demand responds. With a broadly stable breeding herd and improving productivity, UK clean pig slaughterings in 2015 are expected to be between 2% and 3% higher than last year, reaching around 10.5 million head. A similar rise is forecast for next year. With carcase weights also expected to remain high, pig meat production is set to show a similar growth rate.

Despite the unprecedented gap between UK and EU pig prices over the last year, pig meat imports have only increased marginally. This suggests that retailers remain strongly committed to sourcing from the UK and further import growth this year is unlikely. With the euro weakening against the pound, however, export growth may be modest as UK product will be less competitive in overseas markets. In addition, there will be more competition from US and Canadian supplies on global markets than was the case in 2014. With little change anticipated in the trade balance, increased production will translate into more supplies available for domestic consumption. This will need to be met by higher demand if further price falls are to be avoided.

To read about the outlook for UK pig meat supplies in more detail, click here. A full review of the Outlook Conference will appear in next week’s edition of Pig Market Weekly and copies of presentations are available by clicking here.

Pork sales suffer over Christmas

Grocery expenditure was up 1.5% this Christmas, boosted by a fall in prices that meant shoppers took advantage by stocking up on volume over the festive period. Retailers drove the lower end of the price tier market through price cuts but trading-up was a key feature this year. Following a successful Christmas the year before, fresh pork was the only meat category to show a fall in volume purchases, down by 2% on Christmas 2013, with consumers switching to other meats, particularly beef and turkey. The latest Kantar Worldpanel data, covering the 4 weeks to 4 January, indicate that consumers bought less fresh pork less frequently over the Christmas period.

Most of the decline was derived from falling sales of leg and loin roasting joints, although both showed higher sales in premium-tiered categories, albeit from a small base. Volume sales of shoulder joints increased on the year, driven by promotional activity from one of the Big 4, though others also showed an increase in sales. Sales of pork belly over the Christmas period also increased year-on-year in volume terms, with much of this growth coming from the hard discounters. Sales of bacon (including gammon) and ham were also lower than a year before in volume terms, although spending on bacon was up 1% as a result of higher prices. Sausages fared slightly better, with a small rise in sales.
A more detailed analysis of the Christmas retail market will be available in the February edition of Pig Market Trends.

UK pig prices

The EU-spec GB SPP in the week ending 7 February fell again and by a more marked amount than in the previous week to average 137.72p per kg. This was 1.34p lower than the previous week with the marked rise in slaughterings contributing to this development as well as poor demand on both the fresh pork and bacon markets. Estimated slaughterings in GB were 5% or 9,100 head more than in the previous week and as much as 9% more than a year earlier. In the first six weeks of 2015 estimated slaughterings were 7% higher than a year earlier so contributing to the much weaker market so far this year. The ongoing weak Euro and low pig prices on the continent continue to be a concern to the British pig sector. Carcase weights were again virtually unchanged last week and the probe measurement was also stable.

In the week ended 31 January the EU-spec GB APP, at 143.33p per kg, was actually higher by 0.07p on the previous week. As a result, the gap with the SPP in the same week widened further to 4.27p.

The weaner market showed contrasting trends in the week ended 7 February. The price of 7 kg weaners averaged £33.57 a head, back 22p on the week with numbers up slightly. Thus the price represents a new low since the series began in mid-2013 and was almost £8 behind last year. The price of 30kg weaners recovered by £1.32 to £45.92 after the sharp fall of last week with throughputs well down for some suppliers. While this price was over £10 less than in the same week last year it was only 40p down on the same week in 2013.

Falling prices in 2014 bring about increased trade

Throughout 2014, the UK imported more pork, bacon, processed pig meat and sausages than in 2013. However,despite the unprecedented gap between UK and EU prices, the rise was modest. Pork imports rose by 2% on the year with prices down 7% on 2013. With an increased share of pork remaining in the EU, as product was diverted from Russia throughout the year, Denmark supplied over a quarter of the total. Belgium, France and Spain also increased their shipments. For Poland trade more than doubled despite potential ASF fears. German and Dutch trade, however, was down on the year. Denmark was also the main supplier of bacon in 2014, and its trade was up 11% on the year, whereas Dutch shipments dropped by 5%. The average import price was 9% lower. Sausage imports increased the most on the year but still by only 4%, with a notable rise from Ireland. This made it the second largest supplier, while it remained the largest for other processed products, despite a 5% decrease in this category on the year. Trends in December broadly followed those of the year as a whole, although bacon imports were lower than a year earlier.

Exports of pork in 2014 increased by 5% although by value trade fell by around £4 million to £214 million. By volume there was an increase of less than 1% to the EU and market growth was predominantly to Asian markets. China imported 13% more and there was a rise of 7% for Hong Kong. Of the smaller markets there were sharp rises to South Korea and the Philippines and an increase of 5% to the US where import demand has increased because of the PEDv outbreak. Offal exports were also led by Asian markets, with 35% of the 38,400 tonne total going to China, given a rise of almost 90% in 2014, with a smaller rise to Hong Kong. These two markets now account for 60% of UK offal exports. Shipments to the smaller markets of Japan, South Korea and the Philippines were also more. On the other hand a fall of 50% in trade with the EU meant that total offal exports were still lower. Exports of sausages were also lower while processed products increased. Following November’s disruptions, pork exports bounced back in December, with volumes up 13% year on year. Offal exports were also much higher during the month due to sharp growth in trade with China and Hong Kong.

Have EU pig prices reached a turning point?

The EU finished reference pig price dropped over €2 per 100kg through January. In week ended 25 January, the price was €129.19 per 100kg, over €30 down on the year. However, in the following week the price increased by 78 cents to €129.97 per 100kg, the first weekly rise since the start of August. However, the recent depreciation of the euro against the pound equates to a decrease of 6p/kg throughout January, with the latest price continuing to fall and now under a pound, at 97.29p/kg. Due to the weakness of the euro, these changes mean the gap between the UK and the EU average prices continues to widen, to a record 39p (52 cents).There have been some reports of possible trade agreements with Russia, despite ASF outbreaks continuing to plague Eastern European herds, which may have helped the market. However, the normal seasonal trend is for strengthening prices after a short New Year slowdown, as processors call for more pigs as demand starts to recover.

As ever, the larger producers have led the trend in price. Most notably in January, Denmark dropped more than €9 and France by €4. There are, however, signs of positivity in the market not reported since July. German prices increased by €2.52 for the week ended 1 February, putting prices up 65 cents from the start of January. Dutch and Polish prices followed suit. French and Spanish prices remained stable in the latest week but Denmark, after only a slight reduction in week ended 25 January, dropped prices further the following week. Despite any recent gains, prices in most major producers were still around €30 per 100kg lower than a year before, with Spanish prices over €45 lower.

Feed Market Update

After a stable week with relatively little price movement, May-15 UK feed wheat futures closed on Tuesday (10 Feb) at £124.25/t, £1.80 down on the week. This mainly reflects the latest USDA report forecasting another rise in global end of season stocks. There was bullish news for the EU on the trade front with more tenders won and the weakness of the euro contributing to wheat export commitments now once again ahead of last year’s record pace.

From a new crop perspective reports were generally positive, although markets continued to react to changing weather reports. The FAO described early indications for 2015 crops as ‘favourable’ but there is still a long way to go and spring crops, including the world’s dominant feed grain maize, are still to be planted.

UK rapemeal (34%, Ex-mill Erith, December delivery) was £189/t on 6 Feb and showed no change from the week before. On the same date soyameal (48%, Brazilian Ex-store Liverpool, nearby delivery) was £340/t, down £3 on the week before. However, the dry January appears to have taken its toll on the Brazilian soyabean harvest with local analysts cutting their forecasts. However, this could be offset by increases to Argentine production.

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

Compound pig feed production up, prices down

New figures published by Defra show that the average price of compound pig feed in the final quarter of 2014 was at its lowest level since the third quarter of 2010. At £234/tonne, it was around 10% lower than a year before and 20% below the peak in early 2013, when feed cost £290/tonne. During the same period, production of compound pig feed was up 4% year on year to 466,500 tonnes. This is the highest quarterly production since 2001, with output for the year as a whole also the biggest in the same period. There was a particularly sharp rise in finisher feed production in the fourth quarter of 2014, up 9% on the year to the biggest figure for 15 years. This reflects the increased slaughterings and heavier carcase weights of late. Sow feed output was also up, by 6% year on year, but 1% less grower feed was produced.

Overall animal feed output was almost unchanged from a year before in the final three months of last year, as less ruminant feed was produced. Use of cereals in compound animal feed was also almost unchanged. However, there was an 8% increase in the amount of wheat used, while barley, oats and maize all recorded declines of 14-15%. The bigger UK wheat crop this year has allowed it to regain share from the alternatives. Among oilseed meals, there was a shift from rape meal to soya meal, with 6% less of the former used and 5% more of the latter.

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