UK Prices

The monthly average DAPP stood at 152.24p per kg in June, the fourth consecutive month that there has been a price rise although it was still only four per cent higher than in June last year. However, in recent weeks the upward trend has come to an end with prices edging back. The DAPP stood at 151.90 p per kg dw in the week ended 23 July, six pence more than the corresponding week of last year, whereas the cost of production averaged 161 pence in July. Ample supplies of pig meat and some small easing back in demand have contributed to this price fall.

The premium for the UK pig reference price compared with the EU average has remained at about 10 pence per kg dw in recent weeks. This is somewhat less than the premium of over 16 pence a year earlier.

Carcase weights in the DAPP sample have edged up in recent weeks and in the week ended 25 July averaged 78.25kg, up 1kg above the low point of mid-June and also similar to a year earlier.

The 30-kg GB weaner price increased slightly over the month, averaging £45.83 per head in July, partly reflecting an easing of cereal prices. However, this price was still over £6 less than that seen in July 2010, a situation not helped by the ongoing difficult situation of finishers.

The GB export specification sow price has increased six pence in the last month to average 101.3p per kg deadweight (dw) in the week ended 30 July. The situation has been helped by an edging up in sow prices on the continent. Compared with a year earlier the GB sow price at the end of the month was up six pence on a year earlier.

EU Prices and Exchange Rate

The EU average pig reference price after strengthening in the first half of July has since fallen back and averaged €156.21 per 100kg dw in week ended 30 July when it was up four per cent on a year earlier. The barbecue season in northern Europe in July has been disappointing because of the cool weather while some further processors have closed for summer holidays. Also under the Private Storage Aid scheme just under 25,000 tonnes was contracted for release in July and a further 35,000 tonnes in August. For all major Member States pig prices on northern markets, led by developments in Germany, have edged back in recent weeks where there has been a fall of five per cent in the last three weeks.

The value of sterling against the euro has been somewhat stable at €1.13 to €1.14 since April and the July 2011 average against the euro was down five per cent on a year earlier.

UK Slaughterings and Pig Meat Supplies

During June, clean pig slaughterings in the UK totalled 744,000 head, nine per cent higher year on year. This was driven by a 17 per cent increase in Scottish throughputs and an 11 per cent rise in Northern Ireland as the province has been slaughtering more pigs from the Republic. Slaughterings in England and Wales were up by nearly eight per cent. UK clean pig carcass weights during June showed little change compared with a year ago averaging 77.5kg and so total pig meat production was also up nine per cent at 60,000 tonnes. Pig meat production during January to June 2011 totalled 395,000 tonnes, seven per cent higher than the first half of 2010 given a similar rise in clean pig slaughterings.

Total imports of fresh and frozen pork during May 2011 increased 22 per cent year on year to 34,000 tonnes mainly due to a 79 per cent increase in volumes from Denmark. In contrast bacon imports fell 10 per cent totalling 22,000 tonnes.

In the January-to-May period, imports of fresh and frozen pork were eight per cent higher year on year but they remained below 2009 levels. This was driven by a 49 per cent rise in the volume supplied by Denmark. Shipments from the Netherlands, Belgium, France and Spain fell with Ireland and Germany recording an increase in volumes. Bacon imports totalled 115,000 tonnes, down 14 per cent on the year mainly due to a fall for Denmark although Danish export data indicates a rise in shipments to the UK.

During May, exports of UK fresh and frozen pork increased 10 per cent on a year earlier driven by higher shipments to countries outside of the EU. Shipments to the EU fell by one per cent despite considerable increases in volumes being sent to Germany while the growth in exports to non EU markets was fuelled by considerable increases to the Far East, notably Hong Kong and China. Over the first five months of the year, exports of pork increased eight per cent to total 56,000 tonnes driven by the 40 per cent increase in trade with non-EU markets.

Feed Prices

Grains:

Wheat and oilseed rape plantings are up, according to this year’s HGCA Planting and Variety Surveys, with increased arable area overall for 2011 despite the lowest planting of winter barley since 1994. The increase in the total area was influenced by the strong futures prices being recorded at planting time. However, it remains to be seen whether the increased area is at the expense of pulses, root crops or temporary grassland. The Variety Survey showed a continued shift toward feed type wheat varieties in the north as farmers look to maximise yields in response to firm prices.

After a slow start due to unsettled weather and slow crop ripening, harvesting of winter barley and winter oilseed rape in the southern and central regions of England is now well underway. Around 30 per cent of the UK winter barley area has been harvested up to end of Tuesday 26 July. A start has also been made on early winter wheat on light soils. However frequent light showers and cooler temperatures continued to impede progress. Yields are very variable so there is a degree of uncertainty over the average; however average winter barley yields are currently around 10 per cent below the five-year average and winter oilseed rape around 10 per cent above the five-year average. Wheat yields are also expected to be below the five-year average.

LIFFE wheat futures for November delivery have remained relatively static throughout July with only a difference of £7 per tonne between the lowest closing price and the highest. Overall the average for November was £163.65 per tonne, £13 per tonne lower than the average for June. Despite being lower than prices seen in recent months, the price at the end of July was still £30 per tonne above year-earlier levels.

The size of the Russian grain crop is now expected to be in the region of 90 million tonnes, still below the highs of 100 million tonnes seen in 2008 and 2009 but up on early estimates that put the crop at 80 million tonnes. In addition, old crop stocks are also understood to be available, although estimates of these vary. In line with increasing crop estimates, export estimates are also increasing with 20 million tonnes expected currently in 2011/12. Of this the government says that seven million tonnes has already been ordered.

Along with forecast increases in other countries the International Grains Council expects global wheat production to reach 674 million tonnes in 2011/12, up eight million tonnes from their previous forecast and 12 million tonnes above the USDA forecast. Global wheat consumption is forecast at 676 million tonnes, up six million tonnes from the June forecast with feed wheat’s competitiveness versus maize being cited as the cause.

Oilseeds:

Soybean meal prices in the UK have been largely unchanged since the spring in line with global developments. The USDA forecasts of July indicate that global production of soybean meal will be up four per cent to 183 million tonnes in the 2011/12 season. While US exports are forecast to fall, there are expected to be record supplies from South America following bumper harvests and record carry-over stocks. The market is expected to remain in balance with no major change in stock levels and the CBOT futures market for soya, as at the end of July, indicates no significant change in prices over the coming year. The current global economic uncertainty plus reduced use of animal feed is having some impact on the market.

The decline in feed costs is easing the pressure on pig producers. Production costs in August are estimated to be 11 pence per kg dw lower than compared with the peak in March. Producers though on average will still be making a small loss of £4 per pig in August based on latest estimates.

Consumption

In the 12-weeks to 10 July 2011, Kantar Worldpanel data shows that fresh and frozen pork continues to be the best performing red meat, increasing value sales by six per cent and volume sales by eight per cent. The lower growth in expenditure was the result of promotional activity with the average price down two per cent. Leg and loin roasting joints were the main drivers of growth, up 35 and 42 per cent, respectively. All cuts, however, again saw increased volume sales compared to 2010 except frying/grilling steak. Leg roasting joints have been driven by price promotions and loin joints by Y for £X promotions by some of the major retailers.

In the latest four-week period, fresh and frozen pork’s strong performance has accelerated with volumes increasing by 15 per cent and value sales by 14 per cent. Whilst these results might be considered surprising, trade sources indicate strong sales over this period possibly including more imported product. All cuts performed strongly with, again, leg and loin roasting joints the main contributors to growth driven by increased promotional activity. Pork roasting joints continue to gain volume sales from joints of other red meats due to their relative low price. Chicken’s average price has risen sharply during 2011 and this has exacerbated volume sales gains for pork.

Bacon has also performed strongly with volume sales up nine per cent in the 12 weeks ended 10 July and 12 per cent in the four week period ended 10 July. Expenditure in the four-week period ended 10 July was up eight per cent given ongoing promotional activity. Rashers account for about three-quarters of bacon sales and in the 52 weeks ended 10 July 40 per cent of rashers were sold on promotion.

August 2011