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AHDB Pig Market Weekly


14 May 2015

AHDB BPEX Pig Market Weekly - 14 May 2015AHDB BPEX Pig Market Weekly - 14 May 2015


AHDB

Mixed picture on UK imports in March

According to the latest data from HMRC, UK pork imports in March 2015 increased 3% compared to the level seen in 2014. Higher volumes were reported from Denmark, Belgium and Spain, while imports from Poland remain well up on last year. However, shipments from Germany, the Netherlands and Ireland all fell. This is the second monthly rise in imports, suggesting the price difference between the UK and the rest of Europe was large enough to tempt some buyers. This has helped imports to the UK in the first quarter of 2015 increase by 3%. Continuing high supplies of pork in the EU and the weak euro led to the average unit price being 10% lower during the quarter, compared to 2014, which resulted in the total value of UK imports falling 7% year on year. In contrast, imports of bacon were down by 8% in March, with lower shipments seen from Denmark, the Netherlands and Ireland, although purchases from Germany and Spain actually increased. Processed pork imports were up 4% on the year as a result of higher shipments from Ireland and Poland, while the volume of sausages imported fell 7% driven by lower volumes from Germany.

Following increases in February, UK pork exports fell 12% in March, as the strength of the pound led to UK products being less competitive on the global market. Volumes going to all major markets fell, with the sharpest fall being to China, down 27%, making it the second largest market for UK pork. Exports to Germany also fell but by a more moderate 8%, meaning it overtook China as the largest destination for UK pork in March. Exports to Denmark, Ireland, the Netherlands and Hong Kong also dropped. This meant export volumes from the UK in the first three months of the year were down 4% compared with the same period in 2014. The average unit price of shipments in March fell 11%, reducing the total value of UK pork exports to £15.5 million, 22% down year on year. Offal exports were down as increased shipments to China were not enough to offset falls to Hong Kong and EU markets.

Exports from both the US and Canada fall

In the first quarter of 2015, pork exports from the US fell by 15% compared to a year earlier, totalling 352,600 tonnes. This fall comes despite US pork production in the same period increasing, as the current strength of the dollar led to products from the US being less competitive on the global market. Higher volumes of competitively priced pork for export from the EU are providing increased competition for US pork shipments. In addition, labour disputes at some West Coast ports slowed exports to some key Asian markets. Consequently, much of the fall was driven by declining exports to Japan and China, down 9% and 81% respectively. Although total exports were down, shipments to Mexico, the largest market for US pork actually grew 7%, while exports to South Korea increased 46%. The drop in volume was compounded by a fall in average unit price in dollar terms, leading the total value of US exports to be down 19% at $992.2 million.

Falls were also seen in Canadian exports in the first three months of the year, with total export volumes down 3% at 211,600 tonnes. In spite of this decline, shipments to many of the largest markets actually increased, with exports to the US up 30%, those to Japan increasing 7%, Mexico up 43% and South Korea 51%. Most of the fall was due to the Russian ban on imports from Canada, reducing shipments to Russia, the third largest market a year ago, to almost nothing. In the first quarter of 2014, Canada benefitted from Russian bans placed on pork from the EU and the US. Exports to China also dropped by more than half compared with a year earlier. A small fall in the average unit value of shipments led to the total value of Canadian exports falling 4% to C$682.5 million.

UK pig prices

Falling pig prices returned in the week ended 9 May, with the EU-spec SPP down by 0.45p to 131.40p/kg, the lowest level so far in 2015. This increased the difference compared to the same week in 2014 to over 32p. This fall comes despite a 5% drop in the estimated number of pigs slaughtered compared to the previous week, as demand is currently thought to be slightly behind supply. Estimated slaughterings were down at 156,100 head; although this was a shorter week due to the bank holiday, numbers were also 3% below year earlier levels. Carcase weights were virtually unmoved from the previous week to 81.86kg, reducing the difference compared to weights in 2014 to just 800g, just the second time in 2015 that this difference has fallen below 1kg. The average probe measurement remained at 11.1mm, which is the lowest level seen so far in 2015.

The EU-spec GB APP continued to increase in the week ended 2 May, up by 0.61p to 136.51p/kg, the largest increase since April 2014. As prices in the equivalent week in 2014 rose more modestly, this led the year-on-year difference in prices to fall to 29p. The difference between the APP and the SPP for the same week continued to widen, reaching a record 4.66p/kg.

Weaner prices continued to follow the movement seen in the SPP, with prices for both weights falling in the latest week. In the week ended 9 May, both 7kg and 30 kg weaners were down, at £33.30 and £44.18 respectively. This left 7kg weaners down just 5p on the week but £7 down on levels seen in May 2014. Meanwhile, 30kg weaner prices were 24p lower on the week and over £11 down on year earlier levels.

EU economic recovery set to continue

The EU Commission’s latest economic forecast includes an upwards revision for 2015 to a rise in real GDP of 1.8%, increasing to 2.1% for 2016 across the EU. Alongside this, overall domestic demand is anticipated to grow more than in the previous year, helped, in part, by oil prices remaining relatively low and the continued depreciation of the euro. Historically, economic growth and an improving domestic sector are frequently linked to trading-up in retail markets. However, current trends suggest that shoppers remain price conscious after a period of low consumer confidence.

 

Germany has taken advantage of an improving labour market and increasing domestic demand, its strong growth from 2014 driving up the EU average and continuing to do so into 2016. Poland is also forecast to achieve above average growth, driven by strong investment and an improving labour market. However, domestic demand is expected to ease, in part due to ongoing tensions with Russia. France and Italy are expected to record growth as exports prosper and oil prices keep inflation low, relieving some pressure on household spending and pushing up domestic demand.

While the UK is forecast to see economic growth above the EU average, growth is expected to be at a slower rate than in 2014. Despite a combination of falling unemployment rates and increasing disposable household incomes, domestic demand growth is set to slow down over the next 18 months as investment and export growth slow.

Danish pig numbers up in April

According to the April census results published by Statistics Denmark, total pig numbers increased to 12.5 million head. This was 2% higher than the same period in 2014. A 4% rise in the number of weaners (less than 50kg) continued to be the driver of the total increase. However, a fall in the number of slaughter pigs indicates the export of weaners continues at a higher rate, with live pig exports from Denmark up 14% in 2014 and up by 5% in January. The increase in live exports continue to go mainly to Germany and Poland, as December census data shows that their breeding herds remain at reduced levels.

The breeding herd recorded a small increase in size, up by 1%, with an increase in the number of in-pig sows more than offsetting a small fall in the number of in-pig gilts. A 4% increase in the number of maiden gilts shows some positivity for the months ahead. The number of piglets continued to increase by more than the size of the breeding herd, showing further development in pig productivity.

Feed market update

Nov-15 UK feed wheat contract prices have firmed over the week, closing at £119.25/t on Tuesday, up £1.75 week on week. New crop Chicago wheat futures were also up on the previous week but maize futures were lower. On Tuesday, the USDA released its first estimates of global supply and demand for the 2015/16 season. Global wheat production in 2015/16 is forecast to fall by 7.5Mt compared with 2014/15, which points to a thin surplus but, with stocks high, a considerable deficit would be needed to cause concern for the market. For maize, global production in 2015/16 is projected to decline by 6.3Mt year-on-year. Combined with an anticipated 1.3% growth in demand, a slight deficit is predicted. Unlike wheat, maize doesn't have a huge room for manoeuvre with its stocks-to-use ratio without lending support to prices and, just after the report, Chicago maize prices rallied slightly.

UK rapemeal prices (34%, ex-mill Erith, spot delivery) were £193/t on Friday (8 May) up £10 week on week. Soyameal (Brazilian, 48%, ex-store Liverpool, spot delivery) prices were £316/t on Friday, down £1 on the week. There was more bearish news for soyabeans in the USDA’s supply and demand estimates for 2015/16. Unlike for grains, a significant surplus was projected, with the global stocks-to-use ratio expected to rise to above 31% despite a considerable expected increase in demand. There was little surprise from South America as crop estimates for the current season came in very close to the Reuters poll average for both Argentina and Brazil.

More wheat and soyameal used in compound feed

According to latest figures from Defra, compound pig feed production during the first three months of 2015 was 1% lower than a year earlier at 439,000 tonnes. There were similar small falls in production of breeding and finishing pig feed but 6% more grower feed was produced. Although these figures may subject to revision, they suggest that the size of the UK herd remains broadly stable. The figures also show that the price of compound pig feed remained relatively low, with the average of £237 per tonne only marginally higher than the previous quarter, which was the lowest since 2010. Overall compound animal feed production was up 2%, mainly driven by an increase for poultry feed.

 

Although no figures are available specifically for pig feed, more wheat and soya meal were used in all compound animal feed production this year. Compared with first quarter of 2014, 16% more wheat was used, replacing other cereals such as barley, oats and maize. There was also a marked increase in the use of cereals by-products, driven by a 45% rise in use of distillery by-products. For protein, 6% more soya meal was used in animal feed than a year earlier, mainly at the expense of sunflower meal, which was less competitively priced than in 2014.

Pig and Poultry Pocketbook 2015 out now

The 2015 edition of the AHDB Pig and Poultry Pocketbook was launched at yesterday’s BPEX Innovation Conference. Copies will be mailed out to everyone who normally receives one in the next few days. Anyone else who would like to receive a copy can e-mail redmeatmi@ahdb.org.uk. As in previous years, the Pocketbook, which is genuinely small enough to fit in most pockets, pulls together the key facts and figures about the pig and poultry industries in one place. It covers the whole supply chain, from farm to fork, including information about the structure of the industry, prices, production levels, carcase classification, international trade and retail sales. Once hard copies have been distributed, the Pocketbook will also be available to download in PDF format from the BPEX website.

DOWNLOAD REPORT:- Download this report here

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