UK Prices

• 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. Prices moved up further in February, and In the week ended 21 February the DAPP stood at 138.1 p/kg dw, 6.9p more than at the end of December and 26p higher than a year earlier.

• Cull sow prices averaged about 120p/kg in mid-January, but since then prices have fallen back as the Euro has weakened against the Pound. In the week ended 21 February the price averaged 115p. 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 over £5/head since the beginning of the year, to average £48.90 in the week ended 28 February. At this level, prices were over 50 per cent higher than at the same time last year. Weaner prices are showing much more marked year-on-year increases than finished pig prices, due in part to reduced supplies arising from infertility problems last summer.

EU Prices and Exchange Rates

• The average European pig price continued to fall into February, despite lower supplies developing in some countries, due to relatively weak demand. Deadweight pig prices have fallen particularly sharply in Denmark, Italy, Hungary and Poland. Spanish prices were buoyant in February, as pig meat supplies dipped. In addition, Spain has not been influenced by declining Eastern European import demand as much as some other countries. France and the United Kingdom also saw a strengthening of prices.
  
  
• In the week ended 22 February the EU-27 reference price was down two per cent on four weeks earlier. The overall EU price was two per cent lower than a year earlier in Euro terms but, due to the decline in the sterling exchange rate, was up 16 per cent in sterling terms.

• 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 26p by the end of February. This is close to the maximum premium reached in recent years.
  
  
• Despite further cuts in the United Kingdom base rate in January and February, to 1.0 per cent, the sterling exchange rate strengthened against the Euro. However the foreign exchange markets remain volatile due to the fragility of many major economies. In late February the UK Pound was worth 1.13 Euros compared with 1.32 Euros a year earlier. Over the same period the exchange rate with the US dollar declined from 1.98 to 1.44.
  
  
• At the time of writing the Bank of England is about to introduce a fiscal measure known as “Quantitative Easing” which involves increasing the money supply. The impact of this on exchange rates is uncertain.

Other EU News

• Dutch sow numbers were three per cent lower than a year earlier in December 2008 and two per cent less than in August 2008. Slaughter pig numbers held up better than sows numbers, despite half a million more live pigs being exported in 2008. Consequently, total pig numbers in December were 0.2 per cent higher than a year earlier.
  
  
• The results of the January 2009 Danish pig survey show a 3 per cent decline in the number of in-pig sows and gilts compared with a year earlier. The number of young pigs and sows declined more sharply, which reflected a rise of 37 per cent in weaner exports in 2008. Total pig numbers were down by 7 per cent.
  
  
• In France the breeding herd in November 2008 was 0.7 per cent smaller than a year earlier and numbers had also edged down compared with May 2008, indicating that the six year decline in the breeding herd had yet to come to an end.
  
  
• Sow numbers in Italy increased marginally in the second half of 2008, although in December they were just 0.3 per cent higher than a year earlier.
  
  
• The Hungarian pig sector continued to decline sharply in the second half of 2008. Sow numbers in December 2008 were 11 per cent down on a year earlier, while total pig numbers were down 13 per cent.
  
  
• The EU exported 1.2 million tonnes of pig meat in 2008, 35 per cent more than in 2007, aided by the availability of export refunds until August. Particular growth was recorded in exports to Russia, Japan and Hong Kong, while the Ukraine also emerged as an important destination. There was also a 30 per cent rise in pig offal exports, with Hong Kong and China accounting for much of the growth.

UK Slaughterings and Production

• Clean pig slaughterings in the first two months of 2009 were significantly lower than a year earlier. Slaughterings in January were seven per cent less than in the corresponding month of 2008 while preliminary results for February indicate a similar rate of decline.
  
  
• 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.

Feed Prices

• The UK delivered feed wheat price reached £118/tonne at the end of January. However a stronger sterling in February reduced the UK’s wheat export competitiveness and prices fell back. The average price at the end of February was £111/tonne, £80 (42 per cent) lower than a year earlier.
  
  
• Prospects of large exports from Russia and the Ukraine, coupled with increased exportable supplies from the US, Canada and the EU, are expected to put pressure upon the markets in the medium and long term. Nevertheless the futures markets still indicate higher prices over the next year. The May 2009 futures price is currently £112/tonne while November 2009 is £122.

• Soya prices remain volatile. In late January they averaged £326/tonne (ex-mill, Liverpool), up significantly from the £244 reported in mid-December. Soya prices increased in January 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. However, February saw prices move lower, to £302 by the end of the month (£11 higher than a year earlier), due to a combination of gloomy economic forecasts and improvements in the South American crop forecasts.

UK Trade

• In 2008, UK imports of pork totalled approximately 392,000 tonnes, a decline of 15 per cent compared with 2007. There was a reduction in imports from other EU member states as a result of reduced supplies and the weak Pound making imports less attractive. Imports from the main supplying countries – Denmark, Germany and the Netherlands – were down 22, 9 and 24 per cent respectively.
  
  
• The weak currency and increased availability of sow meat meant that UK pork exports increased by 20 per cent in 2008, to 118,000 tonnes. There was an increase in exports to both EU and non-EU destinations. Germany and the Netherlands remained the largest recipients of UK pork, both seeing a slightly increased market share. Exports of frozen pork to Hong Kong increased significantly.

English Pig Survey Results

• Recently released December pig survey results suggest there may be grounds for some cautious optimism about the fortunes of the English pig industry, with an expansion in the breeding herd between June and December 2008. The full results are available by clicking here.
  
  
• Increasing feed costs in the year to June 2008 had led to escalating losses in the sector. One result of this was the historically high sow culling rate, in the first four months of 2008. Consequently, English sow numbers declined by eight per cent in the year to June 2008.
  
  
• Between the middle of 2008 and the end of the year, feed prices moved lower. As a result, estimated net margins moved from negative to positive (albeit a small positive) in the autumn. Producers have appeared to respond to the margin improvements more rapidly than expected. The English breeding herd in December was 8,000 head higher then in June, although still 6,000 (1.6 per cent) lower than in December 2007.
  
  
• The total number of slaughter pigs in December, at 3.28 million, was 2 per cent lower than a year earlier. This reflects both the previous declines in the breeding herd and an element of backlog on farms in December 2007 arising from FMD movement restrictions.
  
  
• Within the slaughter categories the most marked decline was in the lightest category (up to 20kg liveweight), which fell by 8 per cent. This is likely to have been associated with the summer infertility problems which were reported in outdoor breeding herds last year. In June 2008, 42 per cent of English breeding sows were on outdoor units.
  
  
• In June 2008 English producers accounted for 86 per cent of UK breeding sows and 82 per cent of slaughter pigs, so the England results will clearly have a significant influence on the overall UK results. The UK results will be published by Defra on 12 March.

Consumption

• The Jamie Saves our Bacon programme has had a considerable impact on sales after he urged everybody to buy higher welfare pork. TNS data showed consumer purchases of pork shoulder roasting joints were up by over 75 per cent in the week ended 7 February compared with the previous week. This equated to an extra 100,000 roasting joints, and in total pork sales were up by almost 16 per cent in volume.
  
  
• Retail pork purchases in the four weeks ended 22 February were four per cent higher than a year before, reversing the 2 per cent decline seen in the previous period. Average retail prices were 8 per cent higher than last year and as a result expenditure was up 13 per cent. Beef and lamb prices increased relative to pork prices, and this may also have encouraged some switch by consumers.
  
  
• Bacon purchases in the latest period were unchanged compared with a year earlier, although higher prices meant that retail expenditure was 11 per cent higher.

March 2009