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AHDB Pig Market Weekly


07 May 2015

AHDB BPEX Pig Market Weekly - 7 May 2015AHDB BPEX Pig Market Weekly - 7 May 2015


AHDB

EU pig prices increase

The average price of pigs in the EU has been increasing since the end of March, continuing the general trend seen in 2015. In the week ending 26 April, the average price reported to the EU Commission was just under €147 per 100kg, up €1.82 on the week and almost €6 on the level reported 4 weeks previously. In sterling terms the price increased more marginally, up just £2 per 100kg on the level seen four weeks earlier. Prices last April were more stable than those seen in 2015, and so the year on year price difference fell to €15 per 100 kg. It also meant the difference remains smaller than that at the start of the year. These gains are due to increased demand from processors, with most pigs coming forward being sold quickly. Prices were helped by fine weather across the continent resulting in the start of barbeque demand although this appears to have been short lived as the EU market is now falling away again.

Of the major producers Belgium saw the largest price gain in April compared to a month earlier up by €10 per 100kg. Large increases were also seen in the Netherlands, Germany, Poland and Denmark, all up by over €6. More modest gains of up to €3 were seen in Spain, the UK and France. Prices in all major producers remained at least €10 per 100kg below the levels seen in 2014, with Spain maintaining the largest gap, at €40 per 100kg down on 2014 levels. The premium received for pigs in the UK has fallen to almost €34 in the last month as the EU price increased by more than that in the UK. This time last year it amounted to €29.
The increases in prices have led the EU Commission to terminate from 29 April the Private Storage scheme that was opened on 9 March. This is due to reduced uptake following the recovery in prices in the past month. By 27 April 63,500 tonnes of pork had been contracted for with storage periods ranging from three to five months. This included 229 tonnes in the UK.

Sharp recovery in US production

US production as expected showed a sharp rebound in the first quarter of 2015 as the industry continues to recover following the disease affected year of 2014. Production was up over 6% compared with both January-March 2014 and 2013. For 2015 as a whole the latest USDA forecasts indicate a rise of 6% to 11.0 million tonnes. The growth in the first quarter was driven by an increase in the size of the breeding herd, recovery in productivity and higher carcase weights. Production was also well above levels seen in the years prior to the PEDv outbreak and this will continue so output in 2015 will be at a record level.

Despite production increasing, US chilled and frozen pork exports actually fell 14% in the first quarter of 2015 to 353,000 tonnes. This was as a result of the current strength of the US dollar reducing the competitiveness of product on the global market. This has been coupled with high levels of exportable supplies from other countries and a weak euro. Latest forecasts for total US pig meat exports in 2015 are unchanged at 2.2 million tonnes carcase weight down 2% on 2014.

As a result of these factors there is more pork on the US market, which is putting pressure on prices which have fallen to well below levels seen in 2014 and 2013. In the week ended 22 April prices for nearby contracts on the Chicago Mercantile Exchange averaged $62.98 per 100lb, almost half the levels seen in 2014 and almost $25 down on 2013. With production expected to remain higher throughout the year and exports forecast to fall there will be little pressure on prices to increase unless domestic demand picks up strongly.

UK pig prices

Last week the SPP increased after the fall seen in the previous week. In the week ended 2 May, the EU-spec SPP gained 0.28p to reach 131.85p/kg with the difference compared to the equivalent week in 2014 remaining at 32p. This rise can be partly attributed to a 3% fall in the number of pigs slaughtered. On the other hand poor weather had some impact on consumer demand over the bank holiday. Slaughterings in GB were estimated at 164,000 head, however this remains 4% up on the previous year. Carcase weights also fell, by 600g on the week to 81.83kg, the lowest level seen so far in 2015. This fall is partly due to producers marketing pigs earlier due to the back holiday this week. However carcase weights remain over 1kg heavier than the same week in 2014. Partly the result of a fall in the average carcase weight the average probe measurement also declined, to 11.1mm.

 

The EU-spec GB APP again increased marginally in the week ended 25 April, by 0.04p to 135.90p/kg. However the larger increase in price between the same two weeks in 2014 has led the APP to fall to nearly 30p behind the level of last year. This also increased the difference between the APP and SPP in the same week to 4.33p/kg.

The prices of weaners also rose even though throughputs were higher. In the week ended 2 May both 7kg and 30 kg weaners were up, at £33.35 and £44.42 respectively. This meant 7kg weaner prices were up 62p on the week but remained down over £6 on the year. While prices of 30kg weaners increased 35p on the week they were down over £13 compared to the same week in 2014.

PEDv recovery leads Japanese pork imports to fall

The latest figures show that Japanese pork imports in the first three months of 2015 fell by 7% compared to a year earlier, to 173,400 tonnes. However the figure in 2014 was higher due to the emergence of PEDv in Japan, which led to a fall in domestic production and therefore an increased reliance on imports. This fall in imports shows that the Japanese industry is beginning to recover from the outbreak as domestic production can cover more of demand. In addition, high stock levels and subdued consumer demand are also contributing to the reduced need for imports. The total value of Japanese imports only fell 2% to ¥96.2 billion, as higher average unit values offset the fall in volumes.

The EU continued to be the largest supplier of pork to Japan but volumes fell 11% compared to 2014, as exports from Denmark, the largest supplier to Japan in the EU, fell by over a quarter. This caused the EU’s market share to fall to 32% from 34% the year earlier. Other large suppliers of pork from the EU to Japan actually increased shipments, with Spain and the Netherlands both increasing by almost half. Japanese imports from non-EU countries also declined, by 5% from year earlier levels. This was driven by a 12% fall in shipments from the US, while volumes from Chile dropped by 43%. However, the United States remained the leading country supplier, accounting for 33% of the total. This was partially offset by increased imports from both Canada and Mexico, which increased by 8% and 9% respectively.

Wide dispersion in profitability of pig production

There was a wide variation in the economic performance of pig producers in England in 2013/2014. Even though it was a good year a significant proportion still experienced negative returns. The analysis is based on the DEFRA Farm Business Survey and published by Askham Bryan Rural Business Research Unit. The full report can be found here.

The sample covered 75 specialist pig farms which are defined as having at least two-thirds of the enterprise output generated by pigs. It found that 15% of farms had a negative Management and Investment Income (MII) and 21% had a negative Farm Business income (FBI). The top 25% had an average MII of £197,965 while the bottom 25% had an average MII of minus £37,029. Producers with the high MII are inevitably much larger than others even compared with those in the middle 50% band with pig output that was five times higher.

The proportion of loss making pig producers was actually somewhat less than in the previous year but it is clear that many specialist pig farms experienced a sustained period of losses. In 2012/13 50% of farms displayed a negative MII with 23% experiencing a negative FBI.

Feed market update

UK Nov-15 feed wheat futures continue to fall, with the price closing at a contract low of £117.5/t on Tuesday, following poor export data coming out of the US indicating ending stocks will be higher than previously expected. For the UK crop outlook, ADAS suggest that grain crops were in good condition at the end of April, especially as recent rain has lessened fears of below average rainfall. For the new maize crop, US farmers planted a massive 36% of the intended maize area in the week to 3 May.

Stocks of wheat in UK futures stores have reached their highest level for this time of year since 2011. The weakening euro contrasting with a strengthening pound has been one of the stories of the season so far. However in recent days the euro has begun to strengthen which might help support UK prices, which are currently suffering from the current downward movement in global prices. However, it could harm the EU’s competitiveness on the global market and increase competition within the EU.

UK rapemeal prices (34%, ex-mill Erith, spot delivery) were £183/t on Friday (1 May) down £5/t week on week, while soyameal (Brazilian, 48%, ex-store Liverpool, spot delivery) had gained £1/t at £317/t. The forecast for the Argentine soyabean crop has been revised up to a record level, with 62% of the planted area already harvested. In the US 13% of the soyabean area had been planted by 3 May, making progress from only 2% planted in the previous week and 4 percentage points ahead of the five year average.

South Korean pork imports increase sharply

In the first quarter of 2015, imports of pork into South Korea increased by nearly a third compared to 2014, as the effects of PEDv and FMD outbreaks in the country continue to reduce domestic production, increasing its import demand. However, imports remains behind levels seen in 2012, when domestic production was affected by a major FMD outbreak. Shipments from all major suppliers increased, with the US remaining the largest exporter of pork to South Korea, accounting for 29% of all shipments. Bigger gains were seen from the EU, with shipments increasing by two thirds as supplies in the EU remain high and competitively priced, due to the Russian ban and the weak euro. This was driven by large increases in volumes from Germany and Spain, up by 77% and 200% respectively, which led to the EU’s market share increasing to 54% from 43% in 2014. The average unit value of imports also increased in the first three months of the year, leading to total value of imports to be up 50% at 403 billion South Korean Won.

Pig offal imports also increased in the first quarter, up 10% to 5,500 tonnes, back to similar levels seen in 2013. Over half of imports came from the EU, with shipments increasing 13% year on year, again driven by large increases from Spain and Germany. The US remained the largest individual country supplier, with volumes increasing 8% compared to the previous year. The total value of offal imports amounted to ?15.9 billion, up 10% from the year before.

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