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AHDB Pig Market Weekly


03 March 2015

AHDB BPEX Pig Market Weekly - 3 March 2015AHDB BPEX Pig Market Weekly - 3 March 2015


AHDB

EU production ahead of 2013 up to November

In November last year, 20.4 million pigs were slaughtered in the EU, according to data from Eurostat. This was 10% down on the previous month, when there were three more working days. Throughputs were also back on November 2013 due to one less working day in 2014, although the underlying trend was still upwards. Throughputs fell by over 1% but, as carcase weights were higher, helped by lower feed costs, the production fall was smaller. In January to November, EU slaughterings were 226 million head, up marginally compared with a year earlier, while production was virtually unchanged. This small increase in supply, coupled with lower demand, both within the EU and on the Russian market, has undoubtedly had an impact on the finished pig market.

Year on year declines in slaughterings in November were especially pronounced in two of the largest pig producing countries, with Denmark down 8% and Germany showing a reduction of 5%. Danish pig slaughterhouses continue to suffer from the relentless growth in weaner exports. In France, slaughterings were down by 3%. Italy was also apparently down sharply but methodological changes make comparisons difficult. In contrast, slaughterings were up 6% in Spain in response to an increasing herd and as much as 10% in the Netherlands as live exports have been falling. Poland is another of the major pig producers and slaughterings were unchanged year on year. Slaughterings in the UK were also well up, by 5%, and even more so in Ireland with an increase of 9% helped by productivity increases.

Early figures for December show a notable year-on-year increase in slaughterings, partly due to an extra working day this year. This suggests that final figures for the year as a whole will show an increase of around 1% in the number of pigs slaughtered and a similar rise in pig meat production.

Year starts with higher slaughterings

In January, UK clean pig slaughterings were reportedly down 3% on January 2014, according to latest figures from Defra. However, this was due to a sharp fall in reported slaughterings in Northern Ireland, which appears to be an error. Figures from DARDNI show a 2% rise, which seems to be more likely, given a growing NI herd. This would mean that the UK figure would be up 2% year on year at 962,600 head, as throughputs in England and Wales were also up on the year as the backlog of pigs was cleared post-Christmas. With carcase weights returning to a record average of 82.4kg, overall pig meat production was up 4% on the year, based on the revised NI figures (the published figures show a 2% decrease). At 82,900 tonnes, this is the highest January figure since 2000. With the increased supply reported, finished pig prices have remained under pressure from ample supply. The availability of pigs will need to reduce if the market is to reverse, although tighter supplies are normally apparent in the spring.

Sow and boar slaughterings were down on January 2014, by 6% to 23,200 head but this was an increase on the month as processing returned to a normal schedule. Cull sow prices have been very low, which has limited the willingness of producers to replace sows. However, prices are beginning to show some positivity, which could encourage a higher kill in the coming months.

UK pig prices

In the week ending 21 February, the EU-spec GB SPP was 133.95p per kg, 1.11p less than the previous week. This was a smaller drop than the last two weeks but has not broken the recent downward trend, putting the SPP over 8p down since the start of the year and 30p down on May 2014. It is worth noting, however, that prices on the continent are starting to turn upwards, bringing the UK and EU price marginally closer together. This could be an early indicator that UK price falls could possibly soon slow down. However, for now, carcase weights averaged marginally more than last week at 83.11kg, remaining well above recorded weights in 2014. This is contributing to continued reports of supply ahead of demand, despite slightly lower throughputs this week, as AHDB/BPEX estimates that year to date slaughterings are running just under 3% ahead of last year.
In the week ending 14 February, the EU-spec GB APP averaged 138.94p per kg. This was down 2.42p on the week, nearly matching the large weekly drop recorded in the SPP for the same week. Nevertheless, the gap between these two price series grew slightly to 3.88p.

The weaner markets, in contrast, showed some positive price movement in the week ending 21 February. 7kg weaners averaged £33.41, up 20p on the week after three weeks of decline. 30kg weaners recorded a more significant increase of £1.61 on the week to £46.03, the highest price this month. While suggesting some positivity in the finished pig market down the line, these markets remain volatile, partly due to variations in the mix of animals traded each week. The general downward trend is reflected by breeders receiving £8-9 a head more a year ago.

EU Commission launches Private Storage Aid for pig meat

On Tuesday, the EU Commission moved to introduce Private Storage Aid (PSA) for pig meat. The scheme is expected to open next week and will provide support for storage costs of certain cuts for between 90 and 150 days. PSA has been introduced to ease the pressure on the EU pig meat market, with pig prices having now been more than 15% below the 5-year average for over 6 months. This is largely attributed to the Russian import ban at a time when EU production has been increasing, albeit only slowly. Gross producer margins are also well below average, with many producers losing money for a number of months.
Full details of the scheme have not yet been published, although the rates of aid range from €210 to €305 depending on the cut and storage period. Therefore, it is hard to assess what the impact on the market will be at this stage. However, any reduction in the amount of pig meat on the market is likely to give support to prices across the EU.

German trade stable in 2014

After a strong export trade in 2013, German fresh and frozen pork exports did not sustain the same rate of growth and were up less than 1% on the year for 2014. In total, 1.74 million tonnes were exported but at lower prices than in 2013, as supply across the EU was plentiful, in part attributed to the loss of the Russian market. Subsequently, exports directed into the EU from Germany were up 2% on the year, accounting for 1.45 million tonnes of pork, but at a value that was €120 million less than in 2013. Italy continued to be the main export destination for German pork, with volumes up 12% on the year. Poland and the Netherlands, the next largest recipients, however, took a smaller share on the year while some smaller European markets increased their uptake, including neighbouring Austria and France. Growth was also seen with Asian partners, including South Korea and Japan, both compensating for their own disease-disrupted herds, as well as China, the Philippines and Hong Kong. This contributed to exports for the second half of 2014 being higher than the first and pushed fourth quarter shipments up 5% on the year, as well as some festive demand kicking in.

German imports were down almost 2% to 963,000 tonnes, due to decreased deliveries from Belgium, Spain, France and Italy, with domestic production being increasingly sufficient. However, Denmark, the Netherlands, Poland and Ireland delivered more pork into Germany but, with falling unit prices across the board, the value of imports dropped 9% on the year to €1.67 billion.

Feed Market Update

It’s been a bearish week for the grains market. May-15 feed wheat contracts fell over the week closing at £120.50/t on Tuesday 24 February, down £4.50 on the previous Tuesday. May-15 Chicago maize closed at $151.77/t, down $4.82 on a week earlier. Nearby Paris maize contracts have followed the general trend closing €3.75 down on the previous week at €149.25/t. In the absence of major fundamental news, the market appears to lack direction; trading is being influenced mostly by rumours. EU wheat and barley export commitments continued to move strongly ahead of last year’s pace, which reinforces the point that the EU is a key source for wheat this season – but only at the right price.

Prices have increased over the week for both soyameal and rapemeal. The UK rapemeal price (34%, Ex-mill Erith, January delivery) was £190/t on Friday (20 Feb), up £3 from the week before. Hi-Pro soyameal (Ex-Store East Coast delivery) was £320/t (20 Feb), a £5 increase on the previous Friday. The deadlock between buyers and sellers remains in the oilseeds market. The next big event that everyone’s waiting for is confirmation of the South American soyabean crop; harvesting in Brazil will get into full swing in March. With the expectation of a record crop and lower prices, buyers are biding their time.
To read more about the latest developments in the feed market click here.

Trade bans disrupt Russian pig sector

The Russian pig market has often been unpredictable. However, even by Russian standards the last year has been unusually eventful. With pork imports banned from the EU since this time last year and from Canada & the US, among others, since the summer, supplies have been particularly tight. More recently, the devaluation of the rouble and the collapse in the global oil price have hit the Russian economy.

To read more about the latest developments in the Russian pig market and what they may mean for the EU pig industry, click here.

French exports down in 2014

In 2014, France exported almost 6% less pork than it did in 2013, at 455,000 tonnes, despite production being fractionally up on the year. This was largely the result of the Russian ban, as this destination accounted for 6% of French exports in 2013. With exports down overall, it is likely some of this product was absorbed by the domestic market. With ample supply affecting much of the EU, French shipments to the main markets of Italy, the UK, Greece and Spain were all down on the year. This was partly offset by increased shipments to some Eastern EU markets. Outside the EU, deliveries to China also decreased, again as France competed with the EU as a whole in trying to place more product here. However, other Asian markets were more receptive, including Hong Kong, the Philippines, Singapore and Japan. Offal exports were also up on the year by 9%, again with a focus on the Asian market. Reflecting the higher volumes available for trade, unit prices on average fell by 5% for French pork exports. Coupled with lower volumes, this resulted in the value of French exports dropping by 11% on the year, or €99 million, to €840 million.

Pork imports to France in 2014 were steady on the year, increasing by only 800 tonnes but were over 7,000 tonnes up on 2012. However, the mix of suppliers did alter slightly. Spain maintained its position as market leader, despite reducing its supply by 2%, while Germany and particularly Denmark increased their trade with France. Belgium, the Netherlands, Poland and the UK were all down on the year. The US and Australia, as the main non-EU suppliers, increased their deliveries but the EU continued to supply more than 99% of France’s pork import requirements.

February Pig Market Trends out now

The February edition of Pig Market Trends (PMT) was published on Tuesday. As well as the usual summary of developments in the UK and EU pig markets and the global feed market over the last month, this month’s issue includes more detailed articles on:

  • UK Outlook. The past year has undoubtedly been a challenging one for the UK, and wider EU, pig industry due to increased supplies and subdued demand. Supplies are expected to rise again in 2015, based on latest AHDB/BPEX forecasts, and demand will need to respond to avoid further price falls. This article looks at what this could mean for the pig market.

  • Christmas. Grocery sales this Christmas show that shoppers took advantage of lower food prices and increased their spending. However, fresh pork was the only meat category to show a fall in overall volume purchases. Further analysis of the grocery market at Christmas can be found in this article.

  • Russia. The Russian pig market is often unpredictable but even by Russian standards the last year has been unusually eventful. With pork import bans on EU, Canada & the US, supplies have been particularly tight. More recently, the devaluation of the rouble and falling oil prices have hit the Russian economy. Read our analysis of the Russian pig market in this article.

  • Oil prices. The fall in nearby Brent crude oil futures to under $50/barrel, from over $115/barrel in mid-June, although now partly reversed, is likely to have far reaching effects on agriculture. This article looks at what it may mean for the pig industry.

  • Pig Market Trends is available free of charge. You can subscribe by e-mailing redmeatmi@ahdb.org.uk. Recent editions can be downloaded from the BPEX website by clicking here.

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