UK Prices

• UK market prices eased during November, despite a further fall in the value of sterling against the Euro, due to a combination of relatively weak consumer demand and further declines in Continental EU prices. In the week ended 22 November the DAPP stood at 132.1p/kg dw, 3.5p less than four weeks earlier but still 23p higher than a year ago.

• Since reaching a peak of 134p/kg dw in mid-September, UK sow prices have fallen back sharply. Reduced German demand has been a major cause of the weaker market. With the Pound falling further against the Euro, there was, however, a small recovery in the week ended 22 November, to 111p. This price was still 47p higher than at the beginning of 2008.
  
  
• UK pig producers are estimated to have lost on average around £25/pig in the first quarter of 2008, which led to high sow cullings. Higher producer prices and lower feed costs mean that the rate of loss declined, to an estimated £3/pig in September. October saw the industry prove into profit with an estimated net margin of £1/head. Provisional estimates for November indicate a profit of £4/head. These estimates are based on spot prices of compound feeds, so producers who bought forward at a higher price are likely to be still operating at a loss.

EU Prices and Exchange Rates

• Foreign exchange markets have been very volatile in recent months due to uncertainties caused by the “credit crunch” and the move into recession by the United Kingdom and other economies. During November the UK Pound lost about seven per cent of its value against the Euro. Early December has seen further downward pressure, especially against the US dollar, due to widespread expectations of a further cut in UK interest rates.

• A weaker sterling will discourage imports and encourage exports. But it also means that items that are not produced in the United Kingdom and have to be imported, such as soya, will cost more.
  
  
• EU pig meat prices continued to weaken into November, with declines in all of the main producing countries, but markets had a more stable tone towards the end of the month. In the week ended 23 November the EU-27 average reference price was seven per cent lower than four weeks earlier, although, due to the depreciation of sterling during the month, it was virtually unchanged in UK terms. Compared with a year earlier the average EU price was still up 13 per cent in Euro terms and 33 per cent in sterling terms.

UK Slaughterings and Production

• Weekly slaughterings moved slightly higher in November but, nevertheless, remain well down on a year ago. Slaughterings in October were 12 per cent down on a year before while November 2008 slaughterings are provisionally estimated to be 13 per cent lower than in November 2007.
  
  
• The marked declines have occurred because between October 2007 and February 2008 slaughterings were relatively high as abattoirs were working through the FMD-related backlog of pigs. There are therefore likely to be further recorded declines through to February 2009.

• Sow cullings were at very high levels in the first three months of 2008, with high feed costs and industry losses being the prime drivers of these trends. Cullings have moved lower since April, and in July were down on 2007 levels. Sow cullings since July have shown little change, and are currently just under 4.000/week. But between August and November 2007 there was little sow slaughter taking place because of FMD.

Feed Prices

• The final 2008 HGCA Cereals Quality Survey results confirm a decrease in wheat quality compared to last season due to unfavourable weather conditions during the last part of the harvest. This is likely to result in much higher feed wheat availability this year in the domestic and export markets. The weak pound is helping to support export demand into Europe and some third countries.
  
  
• UK delivered feed wheat prices increased slightly during November although feed barley prices eased. In the week ended 28 November feed wheat prices averaged £94.50/tonne, 44 per cent lower than a year earlier. The LIFFE feed wheat futures market is indicating higher prices next year, especially after the 2009 harvest; the May 2008 futures price is currently £99/tonne while November 2008 is £110.

Trade

• The decline in the value of sterling against the Euro this year has hit imports, as a result of higher prices in sterling terms, but it has had a positive effect on exports. Exports also received a boost from the very high volume of sow meat production, nearly all of which is exported, in the early months of 2008.
  
  
• Pork imports in September were the lowest monthly total so far this year, at 27,500 tonnes compared with 40,500 tonnes in September 2007. In the first nine months of 2008, the UK imported 16 per cent less pork than a year earlier. In particular 32,000 tonnes (21%) less pork was imported from Denmark. Significantly less bone-in shoulder meat has been imported from Denmark this year.
  
  
• UK pork exports in September recovered to the levels seen in the first quarter of 2008, when they were still getting a boost from very high sow meat exports. Total exports in the eight months to September were up 21 per cent compared with exports in the same period of 2007.

Consumption

• Retail pork purchases in the four weeks ended 2 November increased compared with the previous four-week period and consequently were just 0.9% lower than a year before. This is the smallest year-on-year decline seen since June. Shoulder roasting joints recorded the largest year-on-year decline, with sales falling by 40 per cent. Purchases of leg toasts were four per cent down and pork chop sales were marginally lower. In contrast, sales of pork steaks were 23 per cent higher and there was a small increase in purchases of loin roasts.
  
  
• Bacon purchases also increased compared with the previous period, and were one per cent higher than a year ago. This was the first increase recorded since March.
  
  
• Retail prices of both pork and bacon remained significantly higher than last year, and consequently retail expenditure increased by eight per cent and 12 per cent respectively.

December 2008