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QMS (Quality Meat Scotland)

23 August 2012

QMS Market Report - August 2012QMS Market Report - August 2012

Farmgate pig prices edged forward for most of July and peaked at 150.6p/kg in the week to 21 July.
QMS - Quality Meat Scotland

Pig Prices and Supplies

Farmgate pig prices edged forward for most of July and peaked at 150.6p/kg in the week to 21 July. They then eased back for two weeks, in line with their seasonal trend, before rising marginally in the second week of August. Compared to last year, the DAPP is now slightly higher; though it traded at a discount between 26 May and 4 August.

UK prime pig slaughterings growth slowed substantially during June as just 0.2% more prime pigs were killed than a year earlier. However, heavier carcase weights and an increased sow kill helped raise overall pigmeat production by nearly 2%. During the first half of the year, throughputs rose 3% and total production volumes were up by 3.5% when compared with H1 2011. This may help explain why market prices have struggled to reach last year’s levels.

In Scotland, June throughputs were 7.5% higher than a year before and H1 figures were up by 7%. The addition of a processing plant last September has made a significant contribution to this increase.

Kantar data shows that consumption of pork in the UK declined by 2% in the three months to July 8. Similar to beef, consumption volumes have decreased primarily due to higher retail prices (+4%) as spending on pork in cash terms has risen. Volume figures in the four weeks to July 8 were even weaker with consumption down 7%. Sausage sales were 2% lower as the negative effect of bad weather on barbecue products offset their strong appeal amid difficult economic conditions.

Weaner values have now fallen each week for four months. In the week ended 11 August they traded at £39 a head, compared with £46 a head in mid-April. It is likely that falling prices are reflecting the decreased confidence that has come as a result of the combination of sharply higher feeding costs and expectations that prices for finished pigs will ease seasonally.

Prices for feed grains and soybeans have stabilised in August having spiked in the first half of July. The spike was induced by an extreme drought in the US which has led to large downwards crop revisions, adding to the supply side pressures previously factored into forecasts from the Black Sea region and South America. Any concerns over the prospects for demand, given the weakness in global economic activity, have clearly been outweighed by supply-side worries. As feeding costs were falling sharply at this time last year, prices have moved further ahead of year earlier levels, and, when coupled with similar prices at the farm gate, margins have continued to narrow.

A sow price sensitive to the export trade has struggled since late spring. In addition to exchange rate movements, which have seen Sterling strengthen 10% over the past year, and by 5% since the end of March, prices have faced headwinds from weaker demand in the EU due to unseasonably wet weather and increased supplies as some producers on the continent liquidate their herds ahead of the sow stall ban. In the opening two weeks of August, sow pr ices slipped below 106p/kg dwt, to trade at an eleven-month low.

Average producer price for grade E pigs in the EU increased by 4.5% between mid-July and mid-August; rising from €1.68/kg to €1.755/kg. UK price competitiveness improved considerably over this period as British prices rose only a fraction in Euro terms. A stable exchange rate subsequently helped improve the competitive position of domestic pigmeat on the home market.

In the first five months of 2012 pork export volumes have been 4.5% higher than in the same period of 2011. However, during May, monthly volumes were at their lowest of the year so far at 11,000t, falling 4% short of year earlier levels.

Pork imports remained well below last year’s levels into May with monthly volumes down 14% year-on-year. In the January-to-May period they were down by 11%. Imports have fallen due to the combination of increased domestic production and a slowdown in demand.

August 2012

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