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AHDB Pig Market Weekly


02 July 2015

AHDB Pig Market Weekly - 2 July 2015AHDB Pig Market Weekly - 2 July 2015


AHDB

Pork purchases still down despite strong shoulder sales

In the 12 weeks ended 24 May, pork sales were still down year-on-year. This was a result of a combination of switching to chicken and lamb, which have been heavily promoted, and lower levels of volume-driving Y for £X promotions this year. Competition has been particularly fierce with chicken, with the price differential between the two proteins increasing over the year. Fresh chicken, for the latest period, was approximately 10% cheaper than fresh pork on average.

Pork shoulder joints were the only cut to record an increase in either value or volume sales, up 3% and 8% respectively. This was largely driven by the final 4 weeks, which featured the launch of a major promotional campaign featuring pulled pork. Chops and steaks declined the most, as in the previous period. Decreased prices did not entice buyers to purchase in bigger volumes and the number of households choosing them was down 10% on the year.

Sausages, bacon and ham sales also under-performed, as in the previous period. The Hard Discounters made some gains with sausages on promotion. More ham was sold on total price reduction than this period last year, rather than multibuy (Y for £X) promotions.

Signs of slowdown in the US

The latest USDA hogs and pigs report shows that the US pig herd on 1 June was 9% larger than a year earlier. However, June 2014 was around the peak of the impact of last year’s PEDv outbreak. Compared with June 2013, the current figure represents a more modest 3% increase. The increase is largely confined to market hogs, particularly in the heaviest weight categories, reflecting the higher carcase weights seen over the last year. The breeding herd, however, was only 1% higher than a year earlier and was down on the previous two quarters.

The quarter-on-quarter decline in the breeding herd may be a sign that the producer confidence apparent a few months ago has dissipated, given the low hog prices since the turn of the year. This is further reinforced by estimates for sows to be farrowed between June and November, which are 3% below actual farrowings in the same period last year. This contrasts with 1% growth in the March-May quarter, which was itself a slowdown compared with the preceding six months. Despite this slow growth, the pig crop for March-May was up 8% on the year, with pigs weaned per litter up to a record 10.37. This confirms that finished pig supplies are likely to remain plentiful for most of the rest of this year, which will ensure prices are likely to remain under pressure until early 2016, at least.

UK pig prices

In the week ended 27 June, finished pig prices continued to increase, showing consistent gains throughout the month of June as supplies continued to tighten, while improved weather may have led demand to rise modestly. The EU-spec SPP was 0.4p higher than the previous week at 132.78p/kg, which was its highest level since late February. However, it does remain almost 31p lower than the same period last year, although the gap is over 2p smaller than at the end of May. Estimated slaughterings continued to decline, down 3% on the previous week as supplies decline seasonally. Slaughterings were at their lowest level in nearly a year, except for Bank Holiday weeks, although they were still estimated to be 1% higher than the same week in 2014. Carcase weights continued to fall marginally but remained over a kilo heavier than the same week in 2014, while the average probe measurement remained stable at 11.2mm.

The GB APP continued to increase marginally in the week ended 20 June, being up by less than a fifth of a penny at 137.05p/kg, as prices continue to broadly follow the trend seen in the SPP. Prices remained over 28p down on the same period last year, while the difference between the APP and SPP fell slightly to 4.67p.
Weaner prices in the week ended 27 June fell compared to the previous week, with 7kg weaners back 55p at £32.57. This is the lowest price recorded in the two years since this series began, amid reports that demand has fallen, making weaners more difficult to place. Prices of 30kg weaners were also down, by 61p at £43.47. Both 7kg and 30kg weaners remained well down on 2014 levels, with prices falling by £9 and £13 respectively.

EU prices up but still low

Having fallen during early May, EU pig prices began to recover later in the month and into early June. By week ended 21 June, the average price had risen to €149 per 100kg, its highest level since last September. This was due to better weather in Northern Europe encouraging sales of grilling cuts, along with some short-term tightening of supplies.

However, the market remains finely balanced and the return of more unsettled weather or a modest increase in supplies could put downward pressure on prices. Despite the recent price increases, the average remains more than €20 down on a year earlier and the summer peak looks set to be significantly lower than in recent years. The recent gains mean that the gap between UK and EU prices has fallen to 24p/kg, the smallest difference since September 2014.

The latest four weeks saw prices rise by between €6 and €9 per 100kg in most major producing Member States. For example, German prices were up €6, although they fell back slightly in the latest week, while Spanish prices rose by €8. Dutch prices rose even more rapidly, with an increase of nearly €11 per 100kg during the four weeks. One exception to the rising trend was Denmark, where prices were more stable, only increasing in the final week of the period having fallen in the previous two weeks.

Pig prices – lessons from history

GB pig prices have recently dropped to their lowest level in over six years. However, before that time, prices had rarely reached the current level. Among the factors which are influencing price levels are the exchange rate between the pound and euro and the level of retail demand relative to supply levels. History tells us that the current combination of a weak euro and retail demand running below supply goes a long way to explaining why pig prices are low.

Feed market update

UK feed wheat futures (Nov-15) closed at £132.00/t on Tuesday, up £7.60 on the week and the highest settlement price since the end of March 2015. The upward trend in price was also reflected in international grain prices. The USDA released its quarterly stocks report on Tuesday, which showed US wheat stocks as at 1 June were the highest since 2011. Maize stocks were at the highest level since at least the start of this century but were still below trade estimates. The latest ADAS arable crop report revealed that the recent dry weather has caused soil moisture deficits in some areas and domestic winter wheat and barley development is behind that seen in recent years. Nevertheless, the overall UK prospects for harvest 2015 are looking good and the crunch point for wheat yields will be the weather in July and August.

Chicago soyabean futures (Nov-15) closed at $381.09/t on Tuesday, compared with $352.98/t a week before and the highest since December. Soyameal prices (Brazilian, ex-store Liverpool, June delivery) were unchanged from the previous week at £292/t last Friday. Rapemeal (34%, ex-mill, Erith, August delivery) was £173/t, up £5 on the week. US soyabean stocks, as at 1 June 2015, were the highest for this point in the year since 2012. USDA estimates the 2015 US soyabean area to be up 1.7% from last year’s record but there is a risk that actual area planted may be lower; since the survey at the start of June wet weather has delayed plantings and so it may not be possible to plant all of the intended area. The IGC expects world rapeseed/canola output to fall by 6% year-on-year as a result of reduced sowings and weather impacts in Australia, Canada and the EU.

Dutch exports focus on pork, not pigs

Dutch pork exports in the first quarter of the year rose by 11% year on year. At 198,000 tonnes, this was the highest level for the first three months of the year since 2011. However, the average unit value of shipments fell by 11%, meaning the overall value of Dutch exports decreased by 1% compared with the first three months of last year, to €358.1 million.

The EU remained the main market for Dutch pork but its share of total exports fell below 80% as the increase in volumes going to EU markets was lower than that to non-EU ones. Italy and Germany were the largest individual country markets for Dutch pork; Italian purchases fell by 1%, while shipments going to Germany increased by 13%. Dutch exports of pork to the UK were up by 25%, making it the third largest market, overtaking Greece, where shipments were down by 8%. Australia was the largest growth market outside of the EU, with volumes more than doubling, overtaking Japan and South Korea as the largest non-EU market.

 

Live pig exports from the Netherlands were halved compared to the same period in 2014 at 1.2 million head. Shipments of all types of pigs were down in the period, with the sharpest fall being to the export of weaners, which were down 54% at 730,200 head. Shipments of slaughter pigs were also down sharply at 418,300 head, 43% lower on the year, as more pigs were retained for domestic slaughter.

June Pig Market Trends out now

The June edition of Pig Market Trends (PMT) was published on Tuesday. As well as the usual summary of developments in the UK and EU pig markets and the global feed market over the last month, this month’s issue includes more detailed articles on:

  • Cost of production. Latest cost of production estimates show that pig producers were, on average, back in a loss-making position in the first quarter of 2015. Further analysis of the data now shows that both breeders and finishers are also losing money based on current weaner price levels. Read about the analysis of production costs in more detail in this article.
  • Pig prices – lessons from history. GB pig prices have recently dropped to their lowest level in over six years. Among the factors which are influencing price levels are the exchange rate between the pound and euro and the level of retail demand relative to supply levels. Analysis of historical trends in this article looks at how these factors influence pig prices.
  • Global prices. Globally, pork prices were exceptionally high in 2014, at least outside the EU. This year, it looks like the opposite will be true. The decline in export prices has also been reflected in domestic prices in many parts of the world. More detail on prices around the world and what they could mean for the EU market can be found in this article.
  • Emerging markets. It is now a year and a half since Russia implemented the ban on imports of pork. Despite this, EU exports fared relatively well after the loss of the Russian market in 2014. Increased volumes going to smaller, non-traditional markets were a significant factor in maintaining the volumes shipped. Read analysis of how EU exports to these emerging markets are faring in early 2015 in this article.

New edition of MeatStats published

MeatStats, AHDB Market Intelligence’s set of data tables covering different aspects of the UK and global meat industry has now been updated to include data up to the first quarter of 2015. MeatStats consists of 13 tables, covering the UK and global meat market. As well as pork, MeatStats tables also cover beef, lamb and poultry meat and provide time series data back to at least 2000 and, in most cases, as far as 1990. Some tables also provide quarterly data for 2014 and 2015.

Between them, the tables cover data on slaughterings and production, international trade, consumption, retail purchases and prices, abattoirs, livestock numbers and seasonality.

DOWNLOAD REPORT:- Download this report here

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