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AHDB Pig Market Weekly


11 June 2015

AHDB Pig Market Weekly - 11 June 2015AHDB Pig Market Weekly - 11 June 2015


AHDB

New era as AHDB Pork brand replaces BPEX

You may have already noticed that the logo at the top of this week’s Pig Market Weekly has changed. From this week the pig and pork-related activity of the Agriculture and Horticulture Development Board (AHDB) will be branded as AHDB Pork. This replaces the previous BPEX brand as part of wider changes to branding across the organisation. Our new brand reflects AHDB’s aim of looking, feeling and behaving as one organisation, delivering better value for our levy payers across all sectors.

The new branding will start to appear on all new material published from now on but existing digital material using the BPEX brand will remain available. Other than the branding, you should not notice any difference in the services being provided by AHDB Pork, including Market Intelligence. Pig Market Weekly and Pig Market Trends will continue to be published as before and so will all the data and reports on the AHDB Pork website.

Global pork prices falling

Globally, pork prices were exceptionally high in 2014, at least outside the EU. This year, it looks like the opposite will be true. Based on prices of exports from the four major exporting regions (the EU, US, Canada and Brazil), the average price reached over US$3.50 per kg last summer. By the end of the year, it had subsided to a more normal $2.95 per kg. Since then, export prices have continued to fall sharply and by March, the average was as low as $2.55 per kg. This is the lowest level recorded since December 2009, is 17% lower than a year earlier and as much as 27% down on last summer’s peak. Pressure on prices continued in April, with unit prices falling for the US, Canada and Brazil; EU figures for April are not yet available.

 

Since last summer, prices have declined across all of the world’s major exporters. Although EU export prices didn’t reach the same heights as those from the Americas, the weakening euro has ensured its prices have still fallen in dollar terms. The average EU export price dropped from around $3.30 per kg in mid-2014 to $2.49 in March 2015 but in euro terms, this represented a fall of only around 10 cents per kg. Similar currency depreciation has helped Brazilian and Canadian pork to remain competitive while limiting domestic price falls. This competitiveness has meant that US export prices have had to fall too, although they have done so more slowly and remain higher than in the other major exporters.

UK pig prices

The UK finished pig price saw small scale increases for the second week in a row in the week ended 6 June. The EU-spec SPP was up by less than half a penny to 131.59p/kg as the market continues to be broadly balanced. However, this is the largest week-on-week increase since May 2014, apart from Christmas week. This meant the difference between the current price and those from the same week in 2014 fell to less than 33p, as prices were falling by this time last year. Estimated slaughterings were up compared to the previous Bank Holiday-affected week but only by 2% and were down by 2% compared to year earlier levels. There was little carcase weight movement in the week, with the average down by 20g on the previous week at 81.47kg; this is over a kilo heavier than a year earlier.

The GB APP remained almost completely stable in the latest week, reflecting the stability also shown in the SPP in the same week. Prices were up fractionally in the week ended 30 May at 136.19p/kg. This means the difference between prices in 2015 and 2014 went back over 30p, while the difference between APP and SPP fell slightly but remained just over 5p.

 

In the week ended 6 June the price of both 7kg and 30kg weaners increased. The price of 7kg weaners was up 9p on the week at £33.25, while the price of 30kg weaners increased by over £1.50 to £44.82 a head. This reversed the fall recorded in the previous week. Both weaner prices remain well below levels recorded in 2014.

EU weaner prices well below last year

The average EU weaner price for the week ended 31 May stood at €41.09 per head, leaving prices well back on 2014 levels. Prices so far this year have followed their normal seasonal pattern, peaking in the spring but have been between €5 and €15 lower than those seen in 2014. Prices in the most recent week were almost €10 down on the same period a year ago. This is despite feed prices currently being at low levels, as the low prices seen in the finished pig market are leading to limited demand for weaners from finishers. So far in 2015, prices increased in the early part of the year, to peak in the week ended 13 April at €44.93 per head but have been falling since.

 

This recent fall in the EU average weaner price was largely driven by a €9 drop in the price of Spanish weaners in the four week period ending 31 May. Other countries registering large falls in this period included the Netherlands, where weaner prices fell by €5.50 per head. Most other major producers, including Germany, France, Poland and the UK all recorded falls of around €3 or less. No key markets showed an increase in the period, although Danish prices were stable. Weaner prices in all major producers were also down compared to the previous year, with Spain and the Netherlands showing the largest falls of around €15 per head.

Producers back in the red

As reported in Pig Market Weekly two weeks ago, latest cost of production estimates show that pig producers were, on average, back in a loss-making position in the first quarter of 2015. This follows eighteen months of positive margins. Further analysis of the data now shows that, as well as farrow-to-finish producers, both breeders and finishers are also losing money based on current weaner price levels.

 

Feed market update

Weather proved to be the main market driver over the past week. US weather concerns have provided support to the market, leading to increases in international wheat futures. UK feed wheat Nov-15 contracts were £129.50/t at Tuesday’s close, up £4.75 on the week. The EU Commission have increased their estimates for both maize and barley production in 2015/16 in their latest balance sheet update, while the wheat estimate was largely unchanged. Despite this, weather remains a key watch point. Spain, France and Germany, have been gaining the attention of the market over the past week as dry weather conditions have been experienced. Rain is forecast in the coming week for France and northern Spain, although Germany is expected to remain relatively dry. While this could provide some support to EU prices, there is still a fair way to go until harvest.

As at Friday (5 June), Hi-Pro soyameal (ex-store east coast, spot delivery) was £283/t, down £8 week on week. Nov-15 Paris rapeseed contracts steadied over the last week, closing at €375.00/t on Tuesday, down €2.50 on the week before. Details of the extent of Canadian frost damage have emerged with sources indicating 4-5% of the total Canadian canola area may have to be replanted. The planted area had already been reduced by unfavourable economics for the crop and, with dry conditions not favouring newly planted crops, further cuts to the area may yet be seen. Preliminary Australian grain production figures from ABARES show a minimal expected impact from El Niño weather conditions. Forecast yields were relatively unchanged from last year following sufficient rains early in the season. However, reduced planted area in key producers and the frost damage in Canada could mean tighter rapeseed supplies for the 2015/16 season.

Global food prices hit lowest level since 2009

The latest food price index from the UN Food & Agriculture Organisation (FAO), covering May, fell 1.4% from April and was down 21% from a year earlier. This leaves the index at its lowest level since September 2009. Cereals and dairy products were responsible for much of last month’s decline. Global cereal stocks remain high and harvest forecasts looked favourable, while dairy stocks were also high and questions persist over Chinese demand, leading prices to fall further. Falls were also seen in the meat index but not to the same extent as the other markets.

 

The FAO Meat Price Index averaged 171 points in May, down 1% from its revised April value. Generally lower prices for meat exports from the US continue to weigh on the index. Overall, international prices of bovine and ovine meat moved lower. After declining since June 2014, pig meat prices were relatively stable in April and May, with European prices, in particular, levelling. Poultry prices have also suffered from import restrictions placed on US products following major outbreaks of highly infectious avian influenza.

Mexican pork trade increasing

Mexico is one of the world’s leading importers of pork, ranking second to Japan among non-EU countries last year. It is also increasing its export sales, making it a more significant player in the global market. In the first quarter of 2015 Mexican imports of pork increased by 11% compared to the level seen in 2014 as its main supplier, the US, saw strong production growth and price falls, following recovery from PEDv. Imports from the US, increased by 4% on a year earlier. However due to further increases in shipments from other countries, the share of total Mexican imports that came from the US fell to 86%. Volumes coming from Canada showed the largest gain in volume, increasing by 88%, with its share of total imports up to 13%.

The average unit value of shipments to Mexico fell 20% in US dollar terms in the first quarter of the year, leading the total value of Mexican imports to fall 11% to $301 million. Average unit values in 2014 were particularly high, which accounts for some of the decline in unit values, but the average price in 2015 fell to its lowest value since 2009.

 

Exports from Mexico in the first quarter of the year were up 19%, reaching 22,400 tonnes, following improving domestic production and higher levels of imports, leaving increased supplies available for export. Exports to Japan, the major destination for Mexican pork, increased 23% to 18,200 tonnes, making Japan’s share of Mexican exports over 80%. Volumes shipped to South Korea grew 22% to 2,200 tonnes while shipments going to the US fell 11% to 1,900 tonnes.

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