UK Prices

• Tight pig meat supplies have continued to lift prices on the UK market. The DAPP stood at 149.7p/kg dw in the week ended 25 April, 5.1p above the level of four weeks earlier and 31p more than a year earlier. Other drivers of the current very firm market conditions this year have been the lower value of sterling against the Euro and some switch by consumers from higher priced lamb and beef.

• Despite a reported easing in demand for sow meat on the Continent, tight domestic supplies led to an increase in sterling terms during March and early April. In the week ended 25 April the price averaged 119p, 4p more than four weeks earlier.
  
  
• A shortage of weaner availability, due in part to reduced supplies arising from infertility problems last summer, and improved finished pig prices have been reflected in higher prices on the weaner market. The 30kg average weaner price reached a record £55.30/head in the week ended 2 May, £12 more than at the beginning of 2009. The previous record price (£54.95) was set in June 1996 when pig prices were benefiting from the BSE crisis.

EU Prices and Exchange Rates

• Economic uncertainties mean that volatile exchange rate markets are continuing to be an important driver in UK and European pig meat markets. Sterling fell sharply against both the Euro and the US dollar in the first quarter of 2009, but it showed some recovery in April.

• The average European pig price continued to fall into February, despite lower supplies developing in some countries, due to relatively weak demand. Since mid-February prices have improved, and in the week ended 26 April the EU-27 reference price averaged three per cent more than four weeks earlier. The overall price was one per cent higher than a year earlier in Euro terms but, due to the decline in the sterling exchange rate, was up 13 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 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. Since then the premium has remained relatively high, fluctuating within a 22-27p range.

UK Slaughterings and Production

• Between October 2008 and February 2009 some marked year-on-year declines in pig slaughterings were 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. March slaughterings were only fractionally lower, but this was because of the unusually early Easter in 2008 and therefore two short slaughter weeks in March 2008.
  
  
• Despite the passing of the FMD-effect, the later Easter this year means that year-on-year April slaughterings are provisionally forecast to decline by six per cent.
  
  
• Looking forward, a more stable breeding herd together with continued improvements in sow productivity are likely to mean that clean pig slaughterings in the second half of 2009 will rise above year earlier levels. Latest BPEX forecasts can be found here.

Feed Prices

• UK crop development is ahead of the same point last year, following warm and dry weather conditions during April. Difficult autumn planting conditions have lowered the winter crop area and raised spring plantings this year. ADAS expects the UK wheat area for harvest 2009 at 1.9Mha, 9 per cent lower than 2008 with a higher proportion of spring wheat (5-6 per cent). The winter barley area is seen 4 per cent down, as a larger southern and eastern area was more than offset by lower plantings in the north and west of the country. The spring barley area is forecast at 730,000ha, 18 per cent above last year.
  
  
• The UK delivered feed wheat price firmed slightly during April; in the week ended 1 May it averaged £111/tonne, £51 (31 per cent) lower than a year earlier. Soyabean prices have also increased in recent weeks due to increased Chinese demand as well as uncertainties over the Argentinean crop. Soya meal (ex-mill, Liverpool) averaged £317/tonne in the week ended 1 May, £1 less than a year earlier.
  
  
• Futures market prices also moved higher in April. The LIFFE futures market indicates largely unchanged feed wheat prices through to this year’s harvest, after which prices will be higher. However 2009-10 prices should remain well below the record levels of 2007-08. The November 2009 futures price is currently £124/tonne while May 2010 is £131.

Consumption

• Retail pork sales were up nine per cent compared with a year earlier in the four weeks ended 18 April, although these results may have been influenced by the earlier Easter in 2008. However the latest 12-week results (which will not be influenced by the timing of Easter) indicate that pork purchase volumes were up four per cent in spite of higher average retail prices. Retail expenditure continued above year earlier levels, up by 12 per cent in the latest 12-week period.
  
  
• Pork and poultry consumption levels appear to be holding up better than beef and lamb in the face of higher prices and the effects of the recession. This suggests there may have been some switch in consumer purchasing habits.
  
  
• Bacon purchases in the latest 12 weeks were down two per cent compared with a year earlier, although higher prices meant that retail expenditure was nine per cent higher.

May 2009