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AHDB Pig Market Weekly


20 August 2015

AHDB Pig Market Weekly - 20 August 2015AHDB Pig Market Weekly - 20 August 2015


AHDB

Strong Chinese demand supports EU exports

EU pork exports in June reached almost 139,000 tonnes, 21% higher than a year earlier and a record for the time of year. The strong performance was driven by shipments to China, which were nearly double their level a year earlier. The Chinese market took over a quarter of EU pork exports for the third straight month, a level which had never previously been reached. Reduced domestic production has led to higher Chinese pork prices and increased demand for imports, with the EU well placed to respond to this, given the weak euro and plentiful supplies. Chinese demand is expected to remain strong for the rest of the year, although this may be tempered by slowing economic growth and recent devaluations of the yuan.

Although China was the main growth driver, there were also increased shipments to South Korea, Australia and a range of smaller markets in Asia and Africa. On the flip side, the ongoing difficulties in Hong Kong were reflected in a halving of sales to that market. Japan and the Philippines also bought less EU pork, although in both cases volumes remained well above those in June 2013. The unit price of exports was only 3% lower than a year before in euro terms (but 20% down in US dollars), so the value of shipments was up 16% year on year, at €325.9 million.

There was a similar picture for pig offal exports, with growth in China dominating, offset by lower shipments to Hong Kong and the Philippines. Again, smaller Asian and African markets performed strongly, contributing to overall growth of 10% on the year. Unit prices were higher than in June 2014, so the value of offal exports rose by 17% to €109.5 million.

Producer share of pork retail price down slightly in July

In July, the share of the retail price received by producers remained just below 35%, which has been the level since April. Farmgate prices recorded a marginal increase since the previous month but the average retail price saw a more significant rise, which has caused the producers’ share to drop by 0.4 percentage points compared to June. July 2015’s figure was 6 percentage points below July 2014, as farmgate prices are well below last year, while retail prices have recorded a minimal decrease.

Retail pork price trends were generally up in July, with an average retail price increase of 3% across the cuts monitored by AHDB MI. Traditional pork sausages saw the largest increase in retail price of 8% compared to the previous month, when the average price for pork sausages was the lowest since August 2011. Fillet end leg also recorded a large increase of 7%. Boneless shoulder and fillet both saw a 4% increase in retail price but there was a 2% decrease in the price of diced pork. The prices of boneless leg, loin steaks and diced pork all remained below levels seen in 2014. However, the price for fillet of pork was up by 6% compared to a year earlier, while both loin chops and pork sausages saw a 4% increase. Fillet end leg and boneless shoulder meat also increased in price by 2% compared to this time last year.

UK pig prices

The GB SPP stayed virtually the same in week ended 15 August, with the EU–spec price standing at 132.57p/kg, a 0.01p fall on the previous week. The market still remains balanced, although we are nearing the end of the holiday season, which may tip the balance towards a higher demand. Nevertheless, it is unlikely that any significant shift will be apparent before mid-September, given the upcoming Bank Holiday.

Even though the price has stayed the same as the previous week, there has been a 26p decrease in price compared to a year before, although the gap continues to close in. Slaughterings were estimated to have increased by just over 4% compared to the previous week, to 176,600 head. This is the highest number since mid-July and 7% more year on year. Carcase weights were slightly down compared to a week prior, averaging 80.21kg in the latest week, but were still 200g up on the same week last year.

In the week ending 8 August the APP EU-spec price fell for the second consecutive week, to 137.03p/kg. The drop during the week was only just over a tenth of a penny but there was a 25p fall on the price in the same week a year earlier. As the fall in the APP was greater than the SPP, the gap between the two prices has increased slightly compared to the previous week, to 4.45p.

Weaner prices for both 7kg and 30kg animals fell slightly in week ended 15 August. At £33.18 per head, 7kg weaners sold for 2p less than the previous week, on average, and were £5 cheaper than a year before. 30kg weaner prices experienced a greater fall of 38p per head which brought the price down to £43.61. This was the lowest price since week ending 4 July and the price has fallen nearly £12 per head compared to the same week last year.

Fall in French pork exports

In the first half of the year, French pork exports totalled 208,800 tonnes, down by 23,800 tonnes (10%) from the same period a year earlier. Shipments to France’s main market, Italy, fell by 16% year on year, while exports were down by 15% to the UK and 26% to Spain. Volumes to non-EU countries also fell but exports to China, the largest such market, saw a rise of 7%. The Russian ban continues to have an impact on French trade, with more pork on the European market combined with the rising price of French pork relative to its EU competitors contributing to the decrease in exports. The French pig price has increased more than most others in the EU this year. That said, the unit price of French pork exports was 6% down year on year which contributed to the total value of French exports in the first half of the year falling by 15% to €366.7 million.

The rise in French pig prices is partly because the French government has imposed a target price of €1.40 per kg in response to recent farmer protests. However, last week two of the largest processors boycotted the Breton pig meat auction, saying that the price was too high and made them uncompetitive against imported pork. This led to the auction, which sets a price that is generally followed for the rest of the pigs sold in France, being cancelled. Talks are underway to try and resolve the situation.

French pork imports decreased by 1% for the first half of 2015, compared to the same time last year, to 180,600 tonnes. Spain remained the largest supplier of pork with a small increase in its share. Volumes imported from Germany fell by 5% which was partially offset by France’s third largest supplier Belgium. Again due to a 9% fall in the average unit price, the total value of imports to France in the first half of the year fell by 10% to £422 million.

What a difference a year makes

Just over a year ago, US hog prices were at record levels; earlier this year they dropped to a 5½ year low. Although they have recovered somewhat since then, prices remain well below levels recorded in most recent years, never mind last year’s highs.

 

Feed market update

UK Nov-15 feed wheat futures fell (£5.25/t) over the week and settled at £114/t at Tuesday’s close (18 August). Chicago (Dec-15) wheat and maize future prices also followed the downward trend. Last week, the latest global supply and demand estimates released by the USDA were the main focus of the market. Wheat estimates pushed prices lower as global production was increased, stemming from higher forecasts in Russia and Ukraine, which offset a lower than expected crop in Canada. It was expected that maize production and stocks were going to be cut by the USDA. However, this was not the case. Against the July forecast, global production was revised 1.5Mt lower but was more than offset by a higher opening stocks forecast.

As at Friday, Brazilian soyameal was £283/t, down £5 week on week. In its latest monthly report, the USDA raised its 2015/16 US soyabean forecast to 107Mt. The general assumption was that US soyabean production would be revised lower but the actual estimate was around 3Mt over the highest prediction. Oil World has increased its forecast of Brazilian soyabean plantings for the coming growing season. The area is forecast at a record 32.8Mha, up 3% year-on-year (subject to weather).

Canadian pork exports fall

In the first half of 2015, pork exports from Canada fell by just under 6% compared to a year earlier, totalling 415,100 tonnes. Despite this decline, shipments to some of the country’s largest markets actually increased. Exports to the US were up by a quarter, to Mexico by nearly half and to South Korea increasing by 28%. Meanwhile, there was a reduction in shipments to Japan, Canada’s second largest market after the US, although they were at a similar level to two years ago. Exports to China dropped by a significant 43%, compared to a year earlier, as they were displaced by more competitive EU pork. These trends continued in the second quarter of the year, as pork exports fell by nearly 9% compared to the same period a year earlier. The total value of both fresh and frozen exports in the first half of 2015 was down 17% on the same period in 2014 to C$1.29 billion, as unit prices were also lower, driven by reduced US prices following its recovery from last year’s PEDv outbreak.

A year ago, Russia was Canada’s second largest export market, after the US, with an 18% share. However, the Russian ban on imports has reduced shipments to nothing in the first half of 2015. To partly offset this, Canada has increased its exports to a range of smaller markets, such as Taiwan, up 55%, and Australia, up 64% on last year, although the latter was just 12% up on the first six months of 2013. There was also significant growth in trade to Chile, New Zealand and South Africa, among others.

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