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AHDB Pig Market Weekly


10 April 2015

AHDB BPEX Pig Market Weekly 10 April 2015AHDB BPEX Pig Market Weekly 10 April 2015


AHDB

EU pig prices stabilise

Following a recovery in the EU average pig reference price seen in February, prices have stabilised in March. In the week ending 29 March, the average price reported to the EU commission was just under €141 per 100kg, up €0.77 on the week. However this was €2 down on the price reported four weeks earlier, with the slight strengthening of the euro in March reducing the fall in sterling terms.

Since prices were rising last March, this has increased the year-on-year difference in prices to €16 per 100kg, although this is well below the annual falls recorded from the autumn through to early 2015. The latest fall in prices is being attributed to an increase in supplies coming to market due to the reduced number of slaughter days during the Easter period, while demand for pigs has been limited by the cooler weather in Northern Europe.

As usual, German finished prices were the main driver of price trends, falling over €6 per 100kg during March, with Dutch, Belgian, Austrian and Polish prices also down by over €4 per kg. However, not all prices followed the German trend, with prices in Denmark increasing €2, while French, Spanish and Irish pigs increased €4 per 100kg.

The prices in most major producers remain over €14 per 100kg behind levels seen during the same period in 2014, with prices in Spain being the furthest back at €37 per 100kg lower than the same week last year. The premium received for pigs in the UK over the EU average remained relatively stable at €38 per 100kg. The recent stabilisation of the euro is likely to have contributed to this, with this expected to continue in the next month as the market awaits the result of the UK general election.

Double digit decline in consumer spending on pork

A 7% decline in average retail prices, coupled with a 4% fall in the amount of pork purchased, resulted in a sharp double digit decline in consumer spending for the latest 12 week period, ended 1 March 2015, according to Kantar Worldpanel.

Consumer switching was a key driver behind volume losses, with chilled ready meals and fresh chicken and beef the main beneficiaries. With the exception of mince, all cuts registered a fall in purchase volumes over the year.

Chops/steaks have recorded falling demand for some time now, while roasting joints have not recovered from a poor Christmas in 2014. Within roasting joints, shoulder, belly and loin all contributed to year on year declines in both volume and value. Volume sales of leg joints remained at similar levels to last year, though cuts in average prices resulted in a fall in total spending.

The amount of premium bacon purchased was up 40% year on year, which has helped total bacon sales to increase compared with the same period last year. Total expenditure on bacon was down due to an average price decline of over 2% at a total bacon level and 6% for premium. However, sales of pork sausages and ham both declined, despite static or falling prices.

UK pig prices

The broad stability in the finished pig market continued in week ended 4 April, with the EU-spec GB SPP again falling marginally, to stand at 132.42p/kg. This was over 30p lower than the SPP a year before, the first week for which it was published.

Although the price has fallen every week since the New Year, it has only lost 0.31p in the last four weeks. The small drop in the latest week came despite several plants being closed for the Good Friday Bank Holiday.

The short week was also reflected in estimated slaughterings, which reached their lowest point of the year so far, at 157,900 head, a similar level to that of last Easter, which was later in the month than this year. Average carcase weights also fell to their lowest level in 2015, at 81.92kg, although this was still nearly three quarters of a kilo heavier than a year earlier.

For the second time in three weeks, the EU-spec GB APP rose for week ended 28 March. It was up by around a third of a penny at 136.81p/kg. This took the gap between the APP and SPP back above 4p/kg, which was the second largest differential since the series began last year.

The stabilisation of the finished pig market appears to have led to a modest improvement in confidence in the weaner trade. Average prices for both 7kg and 30kg weaners rose in the week ended 4 April, to £33.32 and £46.28 per head respectively.

Nevertheless, with pig prices having fallen so far over the last year, the latest weaner quotes are well below year earlier levels. The 7kg price is £7.60 down on a year before, while the 30kg one is over £10 lower.

Trade between EU countries increases in 2014

Trade between EU Member States involves more than three times as much pork as is shipped to third countries, amounting to well over 5 million tonnes each year. This has an important influence on the EU pig market, ensuring that prices in most EU countries remain in line with one another.

Given slightly higher production and reduced exports to non-EU markets, there was more pork available for consumption within the EU in 2014. Therefore, it is unsurprising that there was an increase in the amount of pork traded between EU countries during the year, albeit only by 2%.

Over 80% of the total originated from the six leading exporters, with Germany alone accounting for a quarter. A fall in exports meant that France imported more pork than it exported to the rest of the EU for the first time since 2000, although its shipments to non-EU markets meant it was a net exporter overall.

Ireland was the only other EU country which was a net exporter to the rest of the EU, although Hungary and Finland were also net-exporters when third country shipments are taken into account.

Overall, 22 EU Member States were net importers from the rest of the union, with volumes ranging from over 1 million tonnes in the case of Italy to less than 5,000 tonnes into Malta. Italy was the main growth market, with shipments up by 76,000 tonnes year on year, more than the total intake of 11 EU countries.

Croatian imports rose by 15,000 tonnes in its first full year of EU membership, following a similar rise last year; its exports were nearly 10 times higher than in 2013 but still only amounted to 2,100 tonnes. The UK is the third largest net importer of EU pork, after Italy and Poland but its imports of EU pork were lower than in 2013 as buyers remained committed to sourcing product from the UK.

Private Storage Aid having limited impact

The current Private Storage Aid (PSA) scheme for pig meat came into force about a month ago. By 6 April, requests for PSA for a total of 47,400 tonnes had been entered. To put this into context, it is equivalent to about 40% of EU exports or 3% of production during March last year.

Over 60% related to boned legs, with a further 20% covering boned bellies or middles, with most being stored for the minimum 90 days. The main countries involved are Spain, Denmark, Germany and Poland, accounting for over 70% of applications between them. As all are major exporters, this suggests that the PSA scheme is mainly being used for product intended for export, which will be released at a time of year when demand is usually better on key export markets.

So far, the PSA scheme appears to have had little impact on the EU pig market. Prices in the week before the scheme opened were just under €143 per 100kg but they have since fallen back slightly to stand at around €141 in the final week of March. This supports the view that much of the product involved was probably not destined for the EU market, so the scheme has had little impact on supply levels.

Feed market update

May-15 UK feed wheat futures closed at £121.85/t on Tuesday, up £1.35 on last Tuesday. May-15 Chicago maize futures regained some of the losses following the release of USDA stocks data and were $150.79/t at close on Tuesday, up $2.66 week on week.

The pace of EU soft wheat exports increased last week, bringing the cumulative figure to 2.2Mt above this point last year. The boost in sales was helped by the euro falling to a fortnightly low against the dollar, increasing EU export competiveness.

Mild spring weather in Ukraine and Russia is helping to make up for the dry autumn conditions, leading to Russian Agricultural Consultancy IKAR upgrading Russian wheat production this season to 56Mt, from 50Mt forecast back in January.

Chicago May-15 soyabean futures prices dropped to $356.75/t by close on Tuesday, down $0.82 on the week. UK rapemeal (34%, ex-mill, Erith) was £184/t last Thursday, down £4 since the previous week. Brazilian soyameal, (48%), ex-store Liverpool was £330/t, up £6 week on week.

The latest forecast from the Buenos Aires Grains Exchange now pegs 2014/15 Argentine soyabean production at 58.5Mt, up 1.5Mt from the previous forecast, with higher yields cited as the main reason.

The USDA’s Prospective Plantings report revealed that US farmers are expected to plant a record area to soyabeans in 2015, while US soyabean stocks as at 1 March 2015 were the highest since 2012. 

Italian imports increase in 2014

In 2014, Italy imported over 1 million tonnes of fresh and frozen pork, 8% more than in 2013, making it the world’s leading buyer of imported pork. This came as domestic production was scaled back and availability of supplies was higher across the EU following the Russian ban, meaning Italy secured its position as a growing net importer.

The majority of shipments continued to come from the EU, especially Germany whose share of the market rose to almost 36%. Increases were seen from seven of the ten top ten suppliers to Italy, the exceptions being France with a reduction of only 1%, Belgium and Hungary.

The UK increased supplies too, contributing 2,800 tonnes. Unit prices, however, dropped across the board, averaging a fall of 8% on the year, offsetting the increase in volume as the overall value of imports fell marginally to just over €2 billion.

Consumers also continued to support the import of processed pig meat, which were up 11% on the year; in this case, a 5% fall in price did not stop a growth in overall value which was up by almost €10 million since 2012.

The amount of Italian pork being exported in 2014 was 2% down on the year, driven by a 17% decrease in pork going to the EU. Further afield, Japan overtook Germany as the primary export destination, receiving more than 4 times the amount of 2013. This non-EU trade helped support an overall rise in unit prices, so the value rose to over €169 million, up almost 9% on the year.

Speciality ham exports were equally significant in volume terms, with 75,000 tonnes shipped, up 15% year on year, as domestic demand reduced. This was despite lacklustre demand from the two leading markets, Germany and France, as other EU and global buyers increased their purchases. Despite slightly lower prices, the value of this trade was up 9% to €721 million.

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