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AHDB Pig Market Weekly


04 June 2015

AHDB BPEX Pig Market Weekly - 4 June 2015AHDB BPEX Pig Market Weekly - 4 June 2015


AHDB

Falling pork sales as consumers switch

Pork sales over the latest 12-week period, up to 26 April, suffered partly as a result of switching to other proteins, namely chicken and lamb, which have been heavily promoted by a number of retailers. There have also been lower levels of volume-driving Y for £X promotional activity this year. Pork has come under pressure from chicken, with one of the Big 4 supermarkets selling fresh chicken some 20% cheaper than last year. In addition to this, the price differential between pork and lamb was lower than a year ago at £2.64/kg, which will have encouraged some pork consumers to trade up into lamb.

All pork cuts contributed to the falling performance of the category, despite prices for most being lower than they were a year before. Chops and steaks continue to register the heaviest declines. Within roasting joints, all cuts were down on the year in both value and volume terms. With the exception of loin joints, all roasting joint cuts recorded a fall in average price. The reduction in sales also affected other pig meat products, with spending on both bacon and ham down 4% on a year earlier. Sausages also recorded an overall reduction in volume and value, although there was a small uplift in sales of premium-tiered sausages.

EU pig prices fall in May

In early May, the average price of pigs in the EU fell following increases seen in April but in the most recent week prices started to increase. In the week ending 24 May, the average price reported to the EU Commission was just under €142 per 100kg, up €1.23 on the previous week, but almost €5 down on four weeks earlier. Increases in prices seen in May 2014 mean the gap compared to last year has increased to around €22 per 100kg but this remains smaller than the difference seen at the start of the year. In sterling terms, prices fell 3.5p/kg compared to the level seen four weeks earlier. However, the strengthening of the pound against the euro means prices are currently almost 31p/kg lower than the same period last year. Prices fell as subdued demand, both domestically and for export, led processors to reduce levels purchased. However tightening supplies in recent weeks helped prices to begin to recover.

Poland, Belgium and the Netherlands recorded the largest fall in prices among the major producers in May, with prices down by over €8.50 per 100kg compared to a month earlier. Prices in Germany were down by over €5 but those in Spain were only down by €1. Prices in the UK and Ireland saw marginal gains, in euro terms, while quotes in Denmark were stable. Prices in all major producers were over €14 per 100kg lower than the same point a year ago, with Spain remaining the furthest behind 2014 levels, being down by over €33. The premium received for pigs in the UK increased to almost €40 per 100kg (28p/kg) in the last month as the EU price fell while prices in the UK rose. This time last year it amounted to €32.

UK pig prices

There were only minor fluctuations in the UK finished pig price once again in the week ended 30 May, as the EU-spec SPP increased by less than a tenth of a penny to 131.18p/kg. This indicates that the market remains well balanced at the current price, with no week-on-week movements of more than half a penny since mid-April. The gap between prices this year and last grew in the latest week to over 33p, following larger weekly gains in 2014. Estimated slaughterings fell compared to the previous week, due to some Bank Holiday closures, but they were 9% above levels from the same week in 2014. Average carcase weights were down marginally to 81.49kg, while the average probe measurement fell to 11.1mm.

The GB APP continued to record marginal gains in the week ended 23 May, being up by less than a quarter of a penny to 136.18p/kg. This means the difference between prices in 2015 and 2014 fell to less than 30p. As the SPP saw a price fall in the same week, this led to the gap between the two series increasing to over 5p for the first time since they were introduced in April 2014.

In week ended 30 May, the average price for 7kg weaners increased by 29p on the week to £33.16 per head, with numbers sold remaining similar to the previous week at a slightly high level. Prices for 30kg store pigs fell by over £1.50 to £43.28 due to some shift in the mix of animals sold. Although these markets remain broadly stable overall, both weaner prices remain below year earlier levels.

Polish breeding herd falls

According to provisional figures published by the Central Statistical Office, the Polish pig breeding herd on 1 March 2015 was 4% smaller than a year earlier. In the last couple of years, the number of sows in Poland appeared to have stabilised, having fallen steadily since EU accession. Therefore, the latest drop may be a first sign that low pig prices are starting to have an impact on EU herds, although African Swine Fever outbreaks may have contributed too. If this kind of fall is replicated across other member states, it could lead to a tightening of supplies later in the year. The figures suggest that the drop in sow numbers was relatively recent, since piglet numbers were 4% higher than in March 2014, indicating little change in the number of sows which farrowed in early 2015.

While the breeding herd is declining, the overall Polish pig herd continued to grow, with total pig numbers up 3% on the year. While this is partly because of the previous stabilisation of the breeding herd, increased imports of live pigs also played a major part. In the 12 months to February 2015, Poland imported over 4.4 million weaners, over 500,000 more than a year earlier. If anything, the rate of growth increased in early 2015, with shipments up by a quarter in the first two months of the year.

Lamb legs gain in the run up to Easter

Fresh meat and poultry sales recorded year on year declines in the 12 weeks ending 26 April 2015, even as the economy continued to recover. However, for the 4 week run up to the Easter weekend, lamb and beef sales recorded growth but this was offset by slight declines in chicken and significant reductions in pork sales. In the pre-Easter period, fresh roasting joint sales (beef, pork and lamb) were up compared with Easter 2014, supported by a higher share of households purchasing these cuts. Lamb leg joints sold particularly well, overtaking beef as the joint with highest spending on it in the run-up to Easter, while only pork leg joints were down compared to last Easter. Year on year Easter growth since 2011 has confirmed the position of lamb as an Easter dish.

 

While meat and roasting joint prices have risen in recent years, this Easter saw prices fall across all proteins, aided by heavier promotional activity, especially temporary price reductions. Indeed, 80% of spending on lamb leg joints was on promotion this Easter. This put average lamb prices below Easter 2011 prices and around £2/kg lower than roasting beef prices, a contributing factor to shoppers switching to lamb leg. Within pork, leg roasting joints continued to perform poorly at Easter, despite registering the biggest price decrease of any red meat roasting joint. Pressure in particular came from whole chicken price reductions of up to 20% in the Big 4 retailers. In contrast, pork shoulder continued its recent good performance and was up some 13% in volume sales, helped by an increase in levels of promotional activity at Easter.

Feed market update

The turn of the month has brought an upturn to UK feed wheat futures, with the Nov-15 contract rebounding from £119.45/t, as at Friday’s (29 May) close, to £124.75/t as at Tuesday’s (2 June) close. This is the highest closing price since late April. Paris maize futures have gathered less upward momentum, helping to make the grain relatively more competitive against feed wheat. Market attention is increasingly focused on weather events that could potentially impact on crops for the upcoming harvest. Heavy rains have recently affected the US Plains and possible flooding will remain an important watch area going forward. Closer to home, the latest ADAS Arable Crop Report indicated that domestic crops look to be in generally good condition.

As at Friday (29 May), Hi-Pro soyameal (ex-store east coast, spot delivery) was £291/t, up £10 week on week. UK rapemeal for August delivery (34%, ex-mill Erith) was £162/t, with no comparative price available for the previous week. Whilst prospects for oilseed crops in 2015/16 continue to look mainly favourable, there have been a few bullish news snippets over the past week. Globally, rapeseed and soyabean prices have been moving in opposite directions. Dry weather concerns and frosts in Canada have supported Canadian and European rapeseed futures. Analysts have predicted a 2% increase in Brazilian soyabean area in 2015/16. Despite lower soyabean prices, the incentive to grow the crop remains higher than alternatives such as maize and cotton, the prices of which are even lower.

Bans and currency hit Russian imports

During the first three months of 2015, Russia imported less than half as much pork as in the same period last year. This was largely attributed to the ban on imports from the EU, Canada and the US, among others. Volumes were less than 30% of their level in the first quarter of 2013, before the initial ban on EU pork was imposed. Brazil was the major supplier, accounting for over three-quarters of the total, but even it shipped 22% less pork to Russia. Ukraine and Chile were the only other countries supplying over 1,000 tonnes; last year 12 countries provided at least this amount and the year before the number was 14.

 

Despite further increases in domestic production, this has inevitably left product shortages on the Russian market and pushed prices higher. This is confirmed by the unit price of imports which was up by over 60% in rouble terms, to ?197 per kg, nearly twice the level in January-March 2013. However, given the depreciation of the rouble, the unit price in US dollar terms was down 9%. This helps to explain why suppliers such as Brazil and Chile have not diverted more pork to Russia, despite the lack of competition from other exporters.

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