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UK/EU Market Update - May 2003.

by 5m Editor
1 June 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.

Producer Prices

Meat and Livestock Commission

United Kingdom producer prices have been positively influenced since the beginning of the year by a combination of declining throughputs at abattoirs and by the weaker sterling exchange rate relative to the Euro. Sterling continued to weaken in April and May, rising through the 70p barrier. By the end of May the value of the Euro stood at 72.3p, 1.5p above the value at its launch in January 1999 and 9p higher than a year ago.

In the first three months of 2003 the average price increased by 17p/kg, reaching 109p at the end of March – the highest since August 1997. Prices slipped back during April, as the developing gap between British and continental European prices is likely to have encouraged an increase in import volumes. However market prices recovered in May, so that the average price in the week ended 17 May was again back to 109p/kg.

Weaner prices have moved broadly in line with the finished pig market. After falling back in April, they recovered the lost ground in May. Acute shortages of weaner supplies, resulting from breeding herd contraction and recent problems with sow infertility, mean that prices are still well up on the beginning of the year. The average price of 30kg weaners in late May was £40 a head, £12 more than at the end of 2002.

Reduced supplies and, in particular, the impact of the weaker sterling have also led to generally firm cull sow prices. Sow prices averaged around 55p/kg dw in April and the first half of May, but they fell back 3-4p in the week ended 17 May amid reports of Germany being swamped with cull sows from Poland.

EU prices in Euro terms drifted downwards during May on the back of reported fairly weak consumer demand and export problems. The Euro has appreciated by nearly 30 per cent against the US dollar over the past year, and this has created difficult export market conditions. The average EU price in Euro terms was two per cent lower in the week ended 18 May than a month earlier.

Danish prices have been affected by a sharp drop in export sales to Russia since the Russians introduced a Tariff Rate Quota in April, and prices fell by four per cent over the month. German prices have recently been very volatile, In the three weeks to 3 May German prices strengthened by 10 per cent due to Easter demand, the beginning of the barbecue season and a short supply of pigs from the Netherlands (arising from movement restrictions related to Avian flu in the poultry sector). However, in the following two weeks they fell back by 10 per cent, due to increases in imported supplies and a change in the weather which halted the demand for barbecue cuts.

Slaughterings

Clean pig slaughter levels have been well below corresponding 2002 levels since January. This has arisen in part from a lower breeding herd but more importantly from deteriorating sow productivity. Defra slaughtering statistics for April indicate that UK throughputs averaged around 168,000 head. Preliminary MLC estimates for May are that average weekly throughput was down to 164,000 head, 13 per cent down on a year before. More abattoirs have now moved to only slaughtering on a four-day week owing to lack of supply.

Estimated clean pigs slaughter levels in May

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 some increase in live pig imports from the Irish Republic.

The actual cause of the decline in supplies in Great Britain since the start of the year is unclear. There may well be no single predominant reason, but a number of factors, including:

  • Reports of some sporadic increases in PMWS incidence in the last couple of months.
  • Some disruptions to breeding patterns and performance arising from a significant number of producers depopulating and then repopulating last year.
  • A developing sow infertility problem since last Autumn, which is now beginning to affect clean pig slaughter levels. But, whatever the precise cause, the impact on apparent sow productivity (measured by pigs finished per sow per year) has been dramatic, as the following graph shows.

Consumption

Household fresh and frozen pork volume purchases were down one per cent in the 12-week period ending 27 April compared with a year ago. However the value of retail expenditure was up three per cent due to higher retail prices. Bacon volume sales were up one per cent in the 12-week period, as a result of an increase recorded between March and April. There continues to be growth in overall consumption of processed pig meat products. Sales volumes of frozen pork products increased by 20 per cent, pork sausages by 10 per cent and ham by four per cent.

Feed Usage

The continued cutback in breeding sow numbers and lower number of finishing pigs has led to sharp increases in production of all types of pig compound feeds. The following charts, which show annual percentage changes in production, indicate compound feed production for breeding pigs is currently down around 17 per cent compared with a year ago while finishing feed production is down around 19 per cent. The decline in finishing feed production is occurring at a time when pigs are being finished at heavier weights. Although it could be partly associated with a shift from purchasing compounds to home milling and mixing, it probably indicates that the decline in annual slaughter rates will intensify over the next two or three months.



Source: MLC - May 2003