UK Prices

The upward trend in the DAPP recorded since the beginning of the year has gained further momentum in recent weeks. This was largely as a result of firm domestic demand for pork relative to other red meats combined with some changes in consumer purchasing habits which have aided firm pig market conditions. The DAPP rose consistently throughput April and into May. In week ended 15 May, the DAPP was quoted at 145p per kg, an increase of seven pence since the start of the year, although producer prices remain seven pence lower than the corresponding week a year ago.

The average carcass weights of pigs in the DAAP sample averaged just over 79kg in April and fluctuated around 79kg in the first three weeks of May, almost one kilo heavier than the same period a year ago. Probe values reduced to below 11mm throughout April and remained around 11mm for the first three weeks of May, indicating that heavier carcass weights are not having an adverse affect on producing lean pigs. In week ended 29 May, the average carcass weight reduced to below year-earlier values for the first time since January and the average probe measurement reduced to 10.6mm. The indication is that although throughput is being maintained and the effects of challenging temperatures in January are filtering through the industry.

Following price increases in the sow market during the first quarter of this year, the average sow price reduced in April to 98p per kg, 18 per cent lower than a year ago. The sow price in week ended 15 May eased to 97p per kg, five pence higher than the start of the year, but three pence lower than the beginning of April. Germany, Denmark and the Netherlands all experienced a weakening in the price of sows in first two weeks of May. Although prices have fallen marginally since mid-March the German sow price in week ended 15 May was €1.11 per kg (95p per kg), four per cent higher since the turn of the year. Danish sows achieved €0.90 per kg (77p per kg) in the same week, over 23 per cent higher than in early January. Over the same period sows in the Netherlands also increased by 23 per cent to reach €0.95 per kg (82p per kg).

Improved finished pig prices have been reflected in higher prices on the spot weaner market and since the beginning of the year the weaner prices have also continued to rise on weekly basis. The 30kg GB weaner price increased to £55 per head in week ended 22 May, £5 higher than the start of the year. However, it was over two per cent lower than the corresponding week a year ago.

The economic challenges within some of the Euro-zone countries have resulted in further sharp falls in the euro against both the dollar and sterling in recent weeks. The Euro is now at its lowest level against the dollar since April 2006. In week ended 20 May, the Euro depreciated to below US$1.22 compared with $1.50 last autumn before the decline set-in last December. Sterling has shown a small strengthening against the Euro but is under some pressure against the dollar, not helped by ongoing concern about UK government borrowings and budget deficit. On 19 May, the Euro was worth 84 pence down from 90 pence in mid-March.

The EU pig reference price increased five per cent to €138 per 100kg dw in four weeks leading up to 16 May, three per cent lower than the corresponding week a year ago. In sterling terms, the EU pig price increased by two per cent to 119p per kg, as a gain in the value of the sterling softened the rate of increase.

In the week ended 16 May, the average EU reference price rose by almost two per cent compared with the previous week. Prices in Denmark and Spain increased by three per cent while the Polish price was five per cent higher than the week earlier. Over the same period, prices in Germany rose by two per cent.

UK Slaughterings and Production

Despite the adverse weather conditions earlier in the year, UK clean pig slaughterings totalled 854,000 head during April, seven per cent higher than that recorded in the corresponding month a year ago. However, the effects may have been seen in terms of reduced carcass weights and lower probe measurements. Throughputs at abattoirs in England and Wales were almost seven per cent higher and throughputs in Northern Ireland were considerably higher, up 18 per cent to 141 ,000 head, compared with the same month last year. In contrast, throughputs in Scotland were seven per cent lower in April than the same month a year earlier.

Cumulative UK clean pig slaughterings in January-April were 3.1 million head, nearly six per cent more than in the same period of 2009. Sow slaughterings in the UK totalled 77,000 head during the period, an increase of almost ten per cent compared with the corresponding period a year earlier.

GB sow cullings were 10 per cent higher to mid-May than at the same point in 2009. The UK sow market remained heavily driven by exchange rates and the international market which has been relatively static since the start of spring.

UK pig meat production during April totalled 70,000 tonnes, nine per cent higher than last year. Higher throughputs, combined with heavier carcass weights have resulted in pig meat production increasing during the first four months of 2010, up eight per cent to almost 257,000 tonnes.

In Great Britain, sow prices in Euro terms increased by almost 10 per cent between January and late-February but have since stabilised at prices not significantly different from Germany at €1.12 per kg, and 27 per cent higher than last year. In pence per kg equivalent however, there has been no stabilisation and prices have continued to fall to 96.59 pence per kg due to the further weakening of the GB sterling, representing a reduction of 15 percent to corresponding 2009 prices.

Feed Prices

In the US on 16 May, around 87 per cent of maize was planted for harvest 2010, some 16 per cent ahead of planting at the same point in 2009. The early planting will encourage good crop establishment. However, weather over the key yield forming month of July remains critical to the size of the crop.

The first forecast from the US Department of Agriculture (USDA) for 2010/11 maize production puts world output at a record of 835 million tonnes, some 27 million tonnes above the previous season. Feed demand is forecast to be 493 million tonnes, 11 million tonnes higher than the previous season. In the US, maize demand for use in ethanol production is forecast at 116.8 million tonnes rising by four million tonnes as higher Federal mandates for inclusion and strong blending incentives increase usage. Given the forecast of higher production and the generation of a surplus in 2010/11, global maize ending stocks are forecast to increase to 154 million tonnes, some seven million tonnes above the estimated ending stocks in 2009/10.

Maize remains the dominant driver in global markets, as the supply and demand balance is relatively tight, as opposed to wheat, which is expected to record 198 million tonnes of ending stocks in 2010/11, the highest for a decade. With regards to global production, wheat production is estimated to be down eight million tonnes at 672 million tonnes which, if achieved, will be the third largest global wheat harvest recorded. This reduction in output globally may seem positive, but total availability of wheat may actually increase in the 2010/11 season due to the expected 193.3 million tonnes of stocks being carried in to the new season. Total availability (opening stocks + production) of wheat in the 2010/11 season at current estimates equates to 865.5 million tonnes, some 20 million tonnes above the estimated availability in the 2009/10 season.

Currency markets have had a major bearing on the UK market over the past month. The election, and subsequent uncertainty, had the effect of causing a volatile euro-sterling exchange rate. As such the market was unsure of direction and new-crop Nov-1 0 LlFFE futures have been trading in a range of £1 04-£1 08 per tonne in the past two to three weeks.

In the physical markets in the UK, the average UK ex-farm feed wheat value was at £100.0 per tonne as at 13 May, up £6.20 per tonne from the average ex-farm price a month previously on 15 April. In the latest HGCA feed ingredients price survey, on 14 May, FEMAS soyameal, ex-mill Liverpool, was quoted at £326.50 per tonne for May delivery.

Consumption

In April, the average producer price of pigs rose by one per cent compared with March, although this was three per cent lower than in April 2009. In contrast, retail prices for pork eased month-on-month. As a result, there was a fall in the spread between the producer and retail pork price to 60.5 per cent. This meant that in April the proportion of the retail price producers received continued to edge towards 40 per cent. In April last year, producers received just over 40 per cent of the final retail price. The average retail price for bacon increased in April, returning to similar values to those recorded in February, following low quotations during March. Producers received approximately 31 per cent of the retail bacon price in April, compared with 32 per cent achieved in the same month last year.

The average retail price for boneless shoulders recorded the largest month-on-month price rise between March and April, up four per cent to 531p per kg. The increase in the retail price of fillet end leg was less marked, up one per cent to 620p per kg. In contrast, the price of boneless leg joints fell by three per cent to 622p per kg. The price of minced pork has been relatively stable over the last few months and week ended 8 May was 470p per kg.

Data from Kantar Worldpanel indicates that household purchases of pork over the four-week period ended 16 May 2010 were up eight per cent on the same period in 2009. Value of fresh and frozen pork purchases decreased five per cent. There was a significant increase in the quantity of pork belly purchased in the four weeks to 16 May compared with a year earlier. This appears to be the result of promotions during April as the price differential in the period was down marginally relative to the quantity purchased and value of expenditure. The increase in belly purchases appears to have been in preference to roasting joints.

The retail market appears to be, as ever, continually dynamic in order to maintain market share and customer numbers through the provision of special offers and promotions.

June 2010