UK Prices

• Prices averaged 127p in 2008 as a whole, 18p more than in 2007 and the highest annual average since 1996. Prices weakened slightly towards the end of the year, despite a further fall in the value of sterling against the Euro, due to a combination of relatively weak consumer demand and declines in Continental EU prices. However they remained well above year earlier levels.
  
  
• Supply shortages in January meant that prices showed some increases in the second half of the month, in contrast to the more usual post-Christmas declines. In the week ended 31 January the DAPP stood at 133.5 p/kg dw. 2.3p more than at the end of December and 23p higher than a year earlier.

• Since reaching a peak of 134p/kg dw in mid-September, UK sow prices fell back sharply, to 111p by mid-November. Reduced German demand has been a major cause of the weaker market. With the Pound falling further against the Euro, there were, price increases during December and January. In the week ended 24 January, prices averaged 119p/kg dw, 6p higher than at the end of 2008. Exporters are reported to be competing for market share by paying prices that leave them with little margin.
  
  
• The average price of a 30kg weaner has risen by nearly £3/head since the beginning of the year, to average £46.50 in the week ended 31 January. At this level, prices were just over 50 per cent higher than at the same time last year.

EU Prices and Exchange Rates

• Despite shortages of supplies developing in some countries, relatively weak demand led to a weakening of EU prices in January. Also a recent strong depreciation of the Polish zloty against the Euro, has hit exports from Denmark, Germany and the Netherlands.
  
  
• In the week ended 25 January the EU-27 reference price was down 5 per cent on four weeks earlier. With the exceptions of Italy and the United Kingdom, lower prices were recorded in the major producing countries. The overall EU price was three per cent higher than a year earlier in Euro terms but, due to the decline in the sterling exchange rate, was up 28 per cent in sterling terms.

• The following two charts indicate that there has been a wide range of UK price premia over EU prices (weighted by UK imports) over the past three years. The premium declined fell to just 1p at the beginning of January but the relative weakness of prices in other EU countries meant that it rose to around 10p by the end of the month.

• Despite a further 0.5% cut in the United Kingdom base rate in January, to 1.5%, the sterling exchange rate strengthened against the Euro during the course of the month, although it fell further against the US dollar. However the foreign exchange markets remain volatile. At the end of January the UK Pound was worth 1.09 Euros compared with 1.34 Euros a year earlier. Over the same period the exchange rate with the US dollar declined from 1.98 to 1.42.

Other EU News

• Since the aids to private storage schemes opened in the Irish Republic and Northern Ireland in December, a total of just 78 tonnes of pig meat has been contracted for storage in the Irish Republic.
  
  
• The discovery of a case of swine fever in a wild pig in Germany shortly after Christmas has resulted in Japan banning imports of pig meat from Germany, except heat-treated pig meat. It was only in July 2008 that an eight-year ban was lifted.
  
  
• Four abattoirs in Denmark have regained Russian export approval following the lifting of a ban that was put in place in 2008 prohibiting exports due to Russian antibiotic residue standards. However, a number of plants still remain subject to the ban.
  
  
• The Polish pig herd has fallen to its lowest level since 1970. By the end of November, there were 14.2 million pigs in Poland, eight per cent down on July and 19 per cent less than a year earlier. Sow numbers were six per cent down on July despite a considerable improvement in producer profitability since the summer. As a result, Polish pig meat in 2009 is forecast to be eight to ten percent lower than in 2008.
  
  
• South Korean Ministry for Food, Agriculture, Forestry and Fisheries officials have recently drawn out plans to lift the ban on UK pork and poultry imports, it has been reported in the Korean press. UK pork imports have been banned since August 2007 due to the outbreak of FMD. The British government has now requested a resumption of its meat exports, following its classification as a "clean" nation by the World Organization for Animal Health (OIE). "As our evaluations confirmed the products to be safe, we decided to resume imports," the ministry said. The ban is expected to be lifted some time in February.

UK Slaughterings and Production

• Although weekly slaughterings moved seasonally higher during December, they were three per cent lower than a year before in the month as a whole. January slaughterings are provisionally estimated to be down four per cent. In the 2008 year, UK clean pig slaughterings, at 9.19 million, were one per cent lower than in 2007 while sow and boar slaughterings rose by 12 per cent to 235,000.
  
  
• Since October 2008, some marked year-on-year declines in pig slaughterings have been recorded. This is largely because between October 2007 and February 2008 slaughterings were relatively high as abattoirs were working through the FMD-related backlog of pigs. There is therefore likely to be a further decline in February.
  
  
• Average carcase weights, which had declined in December, increased in the first half of January. Nevertheless, on average, carcases in January weighed 1.5kg less than a year earlier, when processors were still handling the backlog of pigs caused by the FMD movement restrictions in autumn 2007.

Feed Prices

• The International Grains Council (IGC) released its first production estimates for 2009/10 in late January. IGC reported that due to lower prices and higher input costs wheat plantings are estimated to fall by one per cent. World wheat production is expected to fall from the 2008/09 record of 687 million tonnes to 650 million tonnes. EU wheat production for 2009/10 is likely to fall to 141.6 million tonnes (-6%), as the area planted falls slightly, whilst US wheat production is estimated to fall 12 per cent to 59.5 million tonnes.
  
  
• The UK delivered feed wheat price averaged £95/tonne in December, 45 per cent down on a year earlier, but by late January the price had increased to £118/tonne. Prices have been boosted by the exchange rate developments but an additional factor has been from investment funds seeking a safe haven. The LIFFE feed wheat futures market is indicating higher prices next year, especially after the 2009 harvest; the May 2009 futures price is currently £111/tonne while November 2009 is £120.

• Soya prices in late January averaged £326/tonne (ex-mill, Liverpool), up significantly from the £244 reported in mid-December and about eight per cent higher than a year earlier. Soya prices have increased due to a combination of factors including concerns over the South American harvests, increased Chinese buying in recent months and, in the United Kingdom’s case, a lower exchange rate against the US dollar.

Consumption

• Retail pork purchases in the four weeks ended 28 December were three per cent lower than a year before although, due to higher prices, expenditure was up seven per cent. The volume of bacon purchases in the same period was very similar to a year earlier although expenditure was seven per cent higher.
  
  
• In 2008 as whole purchase volumes for pork, bacon and total processed pigmeat products all showed very little change. Pork purchases were one per cent lower while bacon and processed products both showed declines of one per cent. However, for all three market sectors retail expenditure increased due to higher retail prices.
  
  
• Demand for roasts has been particularly poor since the autumn and, although consumption picked up in the latest period, it was still four per cent lower in 2008 as a whole. Purchases of chops feel sharply (-11 per cent) although increases were recorded for belly (+2 per cent) and steaks (+9 per cent).

• The 2008 year was one of two distinct parts as the following chart shows. In the first three months, relatively high supplies and competitive prices meant that retail purchases were significantly up on a year earlier for all three market sectors. But as the year progressed, declining supplies (both home produced and imported) and higher retail prices meant that retail purchases began to trend lower.

February 2009