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AHDB Pig Market Weekly


27 August 2015

AHDB Pig Market Weekly - 27 August 2015AHDB Pig Market Weekly - 27 August 2015


AHDB

Pork retail sales continue to disappoint

Despite a 4% drop in the average retail price, the amount of pork purchased was down by a similar amount in the 12 weeks to 19 July, resulting in expenditure being down 8% year-on-year, according to Kantar Worldpanel. Switching away from pork to chicken and chilled ready meals again impacted performance. Fresh chicken prices fell by a slightly greater amount over the last year and, as a result, the price differential has widened. Fresh chicken is now, on average, just over 50p/kg cheaper than fresh pork. The amount of chops/steaks bought fell, despite a 5% drop in average prices which further impacted on spending. A 6% decrease in the proportion of households buying them, to 35% of households, was the key driver.

Pork roasting joint sales were also down more in value than volume overall, as the result of lower average prices. Pork shoulder was the only roasting joint to register any volume growth and was up 12% year on year. Its performance this period will once again have been boosted by the pulled pork promotional campaign which ran until the beginning of June and featured, amongst other things, a 4-week TV ad campaign. Leg roasting joints experienced the biggest volume decline of 14% year on year, as the amount sold on deals fell from 63% a year ago to 49% this year.

Bacon and sausages did experience growth in the quantities sold, although lower prices meant that spending on them was still down. Sales volume growth for sausages was driven by a 17% increase for premium products. Despite a 5% fall in price, total expenditure on premium sausages increased by more than 6% in the latest period. According to Kantar, the introduction of free school meals is impacting the performance of the cooked meats market. Ham is the leading product in this category, constituting some 55% of expenditure (£1.2billion) in the year to July and volume sales were lower as a result.

Strong UK production continues

For the sixth month in a row, UK clean pig slaughterings rose by more than 3% in July. Throughputs during the month topped 1 million head, the first time that has happened at this time of year since 2000. So far this year, over 200,000 more pigs have been slaughtered than during the same period last year, driven by further improvements in herd productivity. The growth rate in July was actually the lowest since January, which may be partly because the hot spell at the start of the month slowed growth rates, leading to marketing of some pigs being delayed. There were increases across all parts of the UK, although Scottish and Northern Irish throughputs rose slightly more slowly than those in England.

For the second month in a row, sow and boar slaughterings were above year earlier levels, albeit by only 2%. This follows a year of declining throughputs, driven, in part, by low cull sow prices. Carcase weights also increased for both clean pigs and sows but the average weight for the former, 80.0kg, was the lowest since last July and the year-on-year rise of less than 500g was the smallest in two years. The net result was that pig meat production was up 4% on the year, at 83,700 tonnes. With supplies remaining relatively plentiful, there was little to relieve the pressure on the pig market which has kept prices low so far this year.

UK pig prices

With the summer holidays still limiting demand and supplies picking up slightly, the EU-spec SPP eased back by a third of a penny in week ended 22 August, to 132.22p/kg. This is the lowest level since mid-June but only a penny below the recent high point as the market remains broadly in balance. The current quote is still over 25p down on a year earlier, although the gap continues to narrow as prices were falling faster this time last year. Some downward pressure was provided by an increase in the number of pigs slaughtered, estimated at 174,200 head, the highest number since early July and 3% more than the equivalent week in 2014. Carcase weights, however, remained relatively low; at 80.2kg, the average for the week was below its level a year earlier for only the second time this year.

The APP also eased back in the week ended 15 August, to stand at 136.65p/kg (EU-spec), down 0.38 on the week. As the SPP was almost unchanged in the same week, the gap between the two series narrowed to just over 4p/kg. This may be partly because of an increase of nearly half a kilo in the average weight in the APP sample, while standard pig weights in the same week averaged slightly lower than the week before.

The weaner market also remained broadly stable, with prices for the two categories of animal moving in opposite directions. The 7kg piglet average fell by 50p to £32.68/head, while 30kg store pigs were 41p more expensive, at an average of £44.02/head. The former was £6 below year earlier levels, while the latter had dropped just over £7 year on year.

Increased production alters German trade balance

Higher pig meat production in Germany in the first half of 2015 meant that it had more pork available for export and required less imported pork. As a result, exports were up 2% on the same period last year, while imports were 9% lower. With increased supplies also apparent elsewhere in the EU, export growth was driven by non-EU markets, with shipments up by nearly a quarter. Third country exports accounted for 18% of the total, up from 15% in the same period last year and a similar proportion to 2013, before the Russian import ban. Most of the increase was down to a doubling of sales to China, making it the fourth largest market for German exports. Shipments to the rest of the EU were actually slightly lower than in January-June 2014, although volumes sent to the two leading buyers, Italy and Poland, were largely stable. With unit prices 7% lower, the value of German pork exports was 5% down on a year before, at €1.74 billion.

With higher domestic supplies and lacklustre consumer demand, the need for imports was reduced. At 460,000 tonnes, volumes were the lowest in the first half of the year for a decade. All the major suppliers sent less pork to Germany, although the decline from leading source Denmark was only marginal. The UK was also affected, with volumes down 8% at 14,700 tonnes. Much lower prices meant that the value of German pork imports was down by almost a quarter at €693 million.

EU pig price remains stable

In common with the UK market, the EU average pig price has been relatively stable since the beginning of March. Prices have picked up briefly on occasions but any increases have been short-lived. This stability has continued in July and early August, with the average price fluctuating around €144 per 100kg. It did drop below this level in the latest week, ended 16 August, however, to stand at €142.41, the lowest level since May. With both markets flat, the gap between the UK and EU prices has stayed at around 30p over the last month, still very high by historical standards.

In recent weeks, prices have generally been weaker in northern Member States than further south. For example, the German price fell by €3 per 100kg in the latest four weeks, while the Danish price was down nearly €6. Dutch and Polish prices also dropped, as did the Irish quote. In contrast, the Spanish market has been largely static, while the French price has risen by €5. This was partly in response to farmer protests which increased demand for French pork and led to the government imposing a target price for pigs. As a result, French prices are now well above the EU average. Italy has also recorded strong price rises of late.

Feed market update

UK Nov-15 wheat futures moved little Tuesday to Tuesday, closing up £1 at £115/t. Despite a variety of demand-led stories filtering through the international grain markets last week, the pure weight of global supply expectations kept wheat prices subdued. News of strong US weekly export sales lifted grain prices on Thursday but this was only short lived. After the falls in the Chinese stock market on Monday, UK wheat futures initially dropped rapidly on fears of weaker Chinese demand. However, this was offset by the euro strengthening against sterling on the day. With the UK wheat harvest progressing, delivered feed wheat prices have become cheaper relative to imported maize in recent weeks, potentially favouring the use of wheat over maize in rations.

Soyameal prices (Brazilian, 48%, ex-store Liverpool, spot delivery) moved little on the week, up only £1 to £284/t on Friday. In contrast, rapemeal prices (34%, ex-mill, Erith) dropped £7 to £172/t over the same period. On the whole, snippets of price supporting news did not outweigh the downward pressure on the market. Global supply expectations remain high and rainfall in the US was generally beneficial to the soyabean crop there. Oilseed prices received a short-term boost on Thursday, when weekly USDA export sales data were above expectations. However, as with maize, total new crop soyabean sales are still behind last year’s pace. Contrastingly, in Brazil, there has been a substantial increase in the number of ships lined up at ports compared to this time last year.

Trends in the global pork trade

2014 saw widespread disruption to the global pork market. This included Russia imposing sanctions on exports from many of the world’s largest exporters and a series of disease outbreaks around the world. But has the first half of 2015 been more “normal” for the global pork trade?

The four most important exporters in the global pork market are the EU, the US, Canada and Brazil. Each has experienced different factors influencing its export trade in the first six months of 2015. Only the EU has seen an increase in shipments, with the strong US dollar, Russian ban and limited export availability were the main factors behind declines for the US, Canada and Brazil respectively. However, trends for the major suppliers varied between the key importing countries.

August Pig Market Trends out now

The August 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, the latest issue includes more detailed articles on:

• How exchange rates affect the GB pig market
• Trends in global pork trade
• Analysis of developments in the North American pork market
• The Chinese economic situation and what it might mean for pork imports

Pig Market Trends is available free of charge. You can subscribe by e-mailing redmeat.mi@ahdb.org.uk. Recent editions can be downloaded from the AHDB Pork website.

DOWNLOAD REPORT:- Download this report here

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