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AHDB Pig Market Weekly


21 June 2016

AHDB Pig Market Weekly - 20 June 2016AHDB Pig Market Weekly - 20 June 2016


AHDB

Producers share of retail price still low, but rising slowly

The producer’s share of the retail pork price recorded another modest increase in May, to 32%. While this was one percentage point higher than April, levels are still at historical lows, and the producers share is 3 percentage points behind May 2015. These figures are still around the lowest levels for over a decade. While the farmgate price has continued to increase slightly through May, retail prices fell overall, down 3% on the same period a year earlier. Although it is encouraging that farmgate prices are not following the same trend as the retail price, they are still 12% behind May 2015. There was also a marginal improvement in the producer’s share of the retail bacon price in April but it was still down two percentage points on April last year.

The fall in retail pork prices in May was largely due to lower prices for pork fillet (-4%) and minced pork (-2%). Other cuts either experienced small negative movements or were static, with the exception of fillet end leg, which recorded a 2% increase. Over the longer term, price changes were mixed, with diced pork and loin chops recording the biggest price falls (-8% and -5% respectively) versus May 2015. This was partially offset by the 7% price increase of fillet end leg over the same period.

UK exports continuing to grow in April

UK exports of fresh/frozen pork continued to grow significantly in April, to 17.2 thousand tonnes. This was an 18% increase on the same period a year earlier. Once again, China was the main driver behind this growth, with shipment levels almost doubling versus April 2015. The increase in sow slaughterings saw shipment volumes to Germany increase by almost 12%. Export volumes to the United States, Philippines and Poland also recorded strong growth, albeit in smaller absolute volumes. US and Polish shipments more than doubled and exports to the Philippines increased over seven-fold on April 2015.

The value of UK fresh/frozen pork exports increased by over 29%, to £19.3 million, when compared with April 2015. The strong pig price in China has largely driven this value growth, coupled with increased shipments of high value cuts to countries such as the United States and Australia.

Offal export levels also continued to rise in April, more than doubling to 6.6 thousand tonnes. The Asian markets were the main driver of this growth, with China accounting for half of all UK shipments. Sausages and processed products saw export volumes fall, by 45% and 13% respectively, although overall volumes were relatively small.

Imports of fresh/frozen pork were 4% down on April 2015, to 26.9 thousand tonnes. With the UK pig price premium now under 10p/kg, imported pork is no longer significantly cheaper, thus helping to dampen down import levels. Despite rising pig prices in the UK and EU, average unit import prices remain down on April 2015, resulting in the value of imports being almost 16% less than the same period a year earlier, to £41.7 million. The decline in bacon imports continued in April mainly given an ongoing sharp fall for Denmark, down 22%.

UK pig prices

The EU-spec SPP increased once again in week ended 11 June, by 0.97p to 120.40p/kg. This is the first time the SPP has been north of 120p since the beginning of the year, although it is still 11.5p behind the same point a year earlier. The continued strong export demand from China and the buoyant EU price, with supplies tightening but demand improving, are providing support to the UK price. Also on the continent, this may also have been helped by the European football championships and improving holiday trade. Estimated GB slaughterings in the week ended 11 June were up 3% on the previous holiday week but down, by 1%, for the second consecutive week on the same week last year. The average carcase weight decreased by 0.28 kg to 81.83 kg, which would support evidence that supplies are starting to tighten.
In week ended 4 June, the EU-spec APP recorded a rise of 1.55p, the tenth consecutive week of increase, to 122.66p/kg. As the SPP increased by a larger amount in the same week, the gap narrowed to 3.23p.

The GB weaner market also recorded increases in week ended 11 June. 30kg weaners recorded a rise of 98p to £40.40, the highest quote since Christmas week while throughputs were lower. 7kg weaners showed a more modest increase of 5p to £29.85, with throughputs generally more. Likewise, the current quote is the highest since the end of January. As prices were falling in the same week last year the gap has narrowed to £4.12 for 30 kg weaners and £2.75 for 7 kg weaners.

EU production levels starting to stabilise

Provisional figures from the EU Commission show that EU pig meat production decreased year-on-year in March, by 1% to 2.02 million tonnes. This was despite there being an extra working day in 2016, versus 2015. Therefore, this represents a slowdown in growth compared with much of 2015, which supports forecasts that supplies will begin to tighten throughout 2016. Similarly, clean pig slaughterings were down 1% in March on the year earlier, to 22.4 million head, but this was effectively a slighter larger decrease. These production movements would suggest that the herd rationalisations starting to be recorded in the December censuses of major producing states, with the exception of Spain, are now starting to have a tightening effect on supplies.

There were fluctuations in the outputs from the member states in March. The UK had the largest increase, although once the change in reporting periods is taken into account, there was a smaller increase of about 5%, when compared with March 2015. The Netherlands and Spain also saw year-on-year growth in production volumes, of 9% and 2% respectively. However, other member states recorded a fall in production, most notably Germany and Poland, with volumes down 8% and 6% respectively on March 2015. These decreases were despite the longer working month, so may actually represent a greater fall than recorded.

FAO 2016 Food Outlook report now published

The FAO has published its 2016 Food Outlook report this month, so it seems timely to review some of the points the report highlights.

Overall meat production is anticipated to stagnate in 2016, rising by only 0.3% to 320.7 million tonnes. Increases in output are expected in the United States, Brazil, the EU, India and Russia, while reduced production is foreseen for China, Australia and South Africa. However, global production of pig meat in 2016 is forecast to decrease marginally, by 0.7% to 116.4 million tonnes. This will be a second year of virtual stagnation, with the lower output in China being the main reason for this contraction.

Global meat trade is forecast to recover in 2016, growing by 2.8% to 30.6 million tonnes. This represents a return to trend, after a fall in 2015.

Pig meat trade could experience a second year of growth, increasing by 4.4% to 7.5 million tonnes. Most of the principal importing countries are anticipated to increase their purchases, including Mexico, China, Russia, United States, Japan, South Korea and Australia. In response to rising demand, exports are projected to grow, in particular those of the dominant exporters of the United States, Canada, the EU and Brazil.

EU pig meat demand picking up

Demand for pig meat in the EU has been under some pressure in 2015 and into early 2016. This in turn has had an impact on pig prices, with only export demand providing a degree of optimism on the EU market. It has not just been in the UK where the demand situation has been difficult but on the continent as well. In recent weeks, however, the situation has improved. Coupled with this, stored pigmeat from the PSA initiative has been released onto the market from early April. However, much of this product has been available for export, and to help serve China’s growing demand.

EU weaner prices increasing slightly after period of stability

Weaner prices across the EU have remained largely stable since firming through January and February. The average EU weaner price now stands at over €41 per head, for week ending 5 June, which is almost €6 a head more than levels at the beginning of the year. Between March and mid-May, the price fluctuated very modestly, but it has begun to firm again during the second half of May, and is now €0.65 higher than the same period last year. The expected spring flourish on prices seemed to happen earlier this year and then levelled off, suggesting that the confidence in the recovery of the finished pig price is still fragile. However, the recent upturn in weaner prices, whereas normally they are in seasonal decline, infers that this confidence may be beginning to strengthen. This is compounded by the €20/100kg increase in the EU average pig price since the beginning of the year.

Most leading producing states recorded stability in their weaner prices between March and mid-May. Rises in the average weaner price towards the end of May in Germany, the Netherlands, Denmark and Belgium helped to increase the EU average price moving into June. Other member states have had largely static weaner prices up to the beginning of June with the notable exception of Italy where prices have been in steady decline since mid-April.

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