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UK/EU Market Update - February 2003

by 5m Editor
1 March 2003, at 12:00am

By the UK's Meat and Livestock Commission - This MLC report looks at the current market situation in the UK and reviews recent price trends and markets throughout Europe.

UK/EU Producer Prices

United Kingdom producer prices strengthened considerably during January, in contrast to the relatively stable market in the run up to Christmas. The average price of finished pigs at the end of January was 99p/kg dw, 7p more than at the beginning of the month. Prices fell back slightly in the first half of February, but then began to strengthen again. The average price in the week ended 22 February reached 100p/kg, the highest since June 2002. At this level, prices were 12p more than a year before.

A developing shortage of home produced pigs has been the most important reason for the firmer tone to the market. But, in addition, sterling has weakened against the Euro in recent weeks, on the back of a falling US dollar and some concerns about the UK economy. In late February the Euro is worth 68p, 3p more than at the end of 2002 and 7p more than in February 2002, and this will have made imports less attractive.

Acute shortages of weaners, resulting from breeding herd contraction and recent problems with sow infertility, have pushed prices up considerably since the beginning of the year. The average price of 30kg weaners at the end of February was almost £37 a head, £9 more than at the end of 2002. Reduced supplies have also led to much firmer cull sow prices during February. Cull sow prices will also have shown a particular benefit from the weaker sterling, as around 95 per cent of sow meat production is exported. Prices averaged around 57p/kg dw at the end of February, an increase of 13p on a month earlier.

EU prices continued fairly steady overall during January although the first half of February saw prices moving higher In the week ended 16 February the average EU price was four per cent higher than at the end of December in Euro terms (although six per cent higher in sterling terms). There have been some major differences in price trends between member states over this period. Dutch prices increased by 15 per cent and German prices by nine per cent. This was in contrast to Denmark, where prices were little changed, and France which was a three per cent decline. Relatively firm UK price so far this year have led to an increase in the UK price premium over the EU price; the premium reached a peak of 18p in early February, although it has since fallen back slightly.

The Aids to Private Storage (APS) scheme, which opened on 9 December, ended on 19 February. Applications for aid had already been suspended. EU-wide a total of 105,000 tonnes has been contracted for storage, of which 45,244 tonnes is in Denmark, 13,091 tonnes in France and 11,910 tonnes in the Netherlands. A total of just 956 tonnes has been contracted in the UK. Of the 105,000 tonnes, almost 82,000 tonnes is contracted for five months storage. Half the total contracted tonnage comprises boneless cuts. A further 17 per cent comprises bellies without rind and ribs and 14 per cent comprises hams.

Slaughterings

Weekly GB throughputs reached a low point of 159,000 head in June 2002 but showed some recovery in subsequent months, reaching 185,000 head in November. Average throughput fell back slightly to 174,000 head in December, but this was due to a short Christmas working week. To date, 2003 has been characterised by declining home-produced supplies. Throughputs continued to fall in January, averaging 157,000 a week. Although this was not unsurprising in the first half of the month, as supplies had been pulled forward for the Christmas market, weekly throughputs remained low in the second half of the month. MLC estimates indicate that throughputs remained low in the first half of February, at an average 155,000 head.

Slaughter levels in January

Total United Kingdom slaughterings have fallen less markedly than GB slaughterings. This is because of an increase in Northern Ireland, where the breeding herd has been more stable than in Great Britain. Northern Ireland slaughterings have also benefited from an increase in live pig imports from the Irish Republic.

There are indications that some producers were successful at reducing the incidence of PMWS in their herds during 2002. The effects of this can be seen in the following graph. This shows that in the second half of 2002 there was a recovery in apparent sow productivity, although productivity remained below pre-2001 levels. However sow productivity dipped in January, and a further decline is likely in February.

Consumption

Retail pork sales continue to be adversely affected by developing shortages of home-produced product. The volume of purchases in the 12 weeks ended 2 February was down six per cent on a year earlier although, due to slightly higher average prices, expenditure was just four per cent lower. There was a particularly sharp decline in pork purchases over the Christmas period.

Retail bacon sales have been less affected by supply shortages, as there has been an increase in sales of imported bacon. During 2002 some quite marked increases in bacon sales was recorded although in the latest 12-week period there was no further growth in volume purchases or the value of expenditure.

There continues to be growth in overall consumption of processed pig meat products. Sales volumes of pork sausages were six per cent up on last year and ham sales were four per cent higher, while pork ready meals showed a growth of over 20 per cent.



Source: MLC - February 2003