UK Prices

Pig prices continued to seasonally decline throughout September and during the first two weeks of October, albeit at a slower rate of decline. In week ended 16 October the DAPP increased marginally for the first time since the middle of June. However, this was followed by a drop of more than 1p per kg in week ended 22 October. During September the DAPP averaged 141p per kg, six per cent lower than a year ago and 6p per kg lower than its peak in June.

Following a period of declining carcase weights among pigs in the DAPP sample, average carcase weights increased in August and September, in line with year earlier weights. Growing conditions during the summer months aided growth rates, assisting the increase in the average carcase weight. However, this has had an adverse effect on the probe measurement with probes higher than year earlier values.

With the onset of higher input costs since the summer the average GB weaner price reacted at a quicker rate to the DAPP. Weaner prices declined at an increasing rate through June, July and August. The weaner price reduced again in September, albeit at a lower rate, to average £46 per head, 15 per cent lower than the year high and 13 per cent lower than in September 2009.

The GB sow price increased in September to average just above 100p per kg with prices increasing throughout the month. During the first weeks of October the price fell back to below the 100p per kg mark. This is in line with the European market which experienced a price rally during September as competition for sows, and market share, increased. The average German sow price increased markedly in September as a result of a re-alignment in the market price reporting. The German September average equated to just below 110p per kg, 17 per cent higher than August. Increased demand for Dutch sows in September resulted in a 20 per cent increase in the average price compared with August although the first three weeks of October recorded a reduction in the average price to approximately 87p per kg.

Exchange Rates and EU Prices

The value of sterling has weakened markedly since the September average of €1.19. In week ended 16 October sterling was valued at €1.14, the lowest valuation for six months, with one euro valued at 88 pence.

Across Europe, the average pig producer price was €145 per 100kg in September, a reduction of €6 per 100 kg compared with August. The downward trend continued during the first weeks of October with EU prices €138 per 100 kg in week ended 16 October.

In the eight-week period to 16 October the average European price declined by nine per cent. Prices in Spain and Poland reduced by 18 per cent and 15 per cent, respectively, during the period whilst prices in the Netherlands, Germany, Denmark and France declined at lower rates between six and nine per cent. In Euro terms, the UK price reduced by 10 per cent during this period, emphasising the importance of the exchange rate on the relative competitiveness of UK product.

UK Slaughterings and Production

Slaughterings of clean pigs in the UK totalled more than 728,000 in September, one per cent higher than in August and five per cent higher than the corresponding month a year ago. Over 561,000 pigs were slaughtered in England and Wales during the month, four per cent more than a year ago. Clean pig slaughterings in Scotland during September also increased four per cent year-on-year to 46,000 head. Northern Irish slaughterings were just below 121,000 head, 14 per cent higher than a year ago. During September, slaughterings in Northern Ireland accounted for 17 per cent of UK slaughterings, an increase from 16 per cent in 2009.

Total third quarter UK clean pig slaughterings exceeded 2.3 million head, three per cent higher than a year earlier and in the nine months to September, UK clean pig slaughterings were five per cent higher in comparison with 2009 levels. Slaughterings in England and Wales for the first nine months of the year increased five per cent to 5.3 million. Slaughterings in Northern Ireland increased by 14 per cent to 1.1 million, while Scottish slaughterings, despite increasing in September, remained six per cent lower year on year for the first three-quarters of the year.

Sow slaughterings in the UK increased to 17,000 in September, although this represented one per cent fewer sows slaughtered compared with September 2009. Third quarter sow slaughterings were marginally lower than year earlier numbers. However, for the year to date, six per cent more sows have been slaughtered in the UK compared with the first nine months of 2009.

Combined with increased carcass weights during the first part of the year, pig meat production for the first nine months of the year increased six per cent to almost 557,000 tonnes.

Imports of fresh and frozen pork to the UK during the first eight months of the year were six per cent lower than the corresponding period a year earlier. Imports from Denmark were 26 per cent lower than a year earlier, although this 18,500 tonnes decrease was largely offset by an extra 16,000 tonnes from the Netherlands. Belgium increased deliveries to become the third largest supplier of fresh and frozen pork to the UK ahead of Ireland where imports remained broadly unchanged compared with a year earlier. Imports of fresh and frozen pork from Germany and Spain reduced by 11 and 39 per cent respectively.

During the first eight months of 2010 exports of fresh and frozen pork increased to 81,000 tonnes, 28 per cent higher than in 2009 although only seven per cent higher than in 2008. An extra 14,000 tonnes of pork were exported to the Netherlands and Ireland in total and the proportion of pork delivered within the EU-27 increased from 76 per cent in 2009 to 85 per cent in 2010.

Feed Prices

The whole grain and oilseed market was influenced by two major factors during September and into October, the size of the US maize crop and the relative weakness of the US dollar. The global nature of the market resulted in knock-on effects in the UK.

The first major fundamental market event was the USDA reduced its estimate of the US maize crop by 13 million tonnes to 321 million tonnes, where earlier estimates had been six per cent higher at 340 million tonnes. With demand for maize increasing in the US by 10 million tonnes this season, to 291 million tonnes, US domestic ending stocks were lowered to 22.9 million tonnes, 47 per cent lower than in the 2009/10 season. The US domestic stocks-to-use ratio is now at the extremely uncomfortable level of seven per cent, well below the perceived ‘comfort zone’ of anywhere above 15 per cent.

With the sudden contraction in US maize availability the market reacted with consecutive increases in Chicago. CBOT nearby maize futures reached $228 per tonne on 12 October before falling back over the next few days as profits were realised. As ever, the UK followed the American market, with wheat futures prices for November 2010 delivery steadily trading above £160 per tonne since 8 October.

In the protein market, soybeans followed the maize trend. The following of the maize market, coupled with continued strong demand from China resulted in the Chicago soyabean price reaching two-year highs of over $445 per tonne on 20 October. Chicago soyameal values followed the bean market also with two-year highs of $372 per tonne on 20 October. Soya oil continues to lead the way as a key driver of demand for beans to crush, due to the tight nature of the vegetable oil market (due to lower rapeseed and sunflower seed supplies and strong demand) soya oil has been highly sought after.

Consumption

At retail, despite the producer price falling by two per cent in September, the average retail price declined only marginally to remain at 363p per kg. As a result the proportion of the retail price obtained by producers continued to reduce in September to 39 per cent. In September 2009 the proportion of the retail price received by producers was 41 per cent.

The small fall in retail price in September was driven by a five per cent decline in the price of fillet end legs and a four per cent decline in loin chops. The price of loin steaks also declined although by less than one per cent. The remaining four cuts quoted in the retail price survey increased by between one and two per cent which offset the majority of the decline.

The latest Kantar Worldpanel data indicates that during the 12-week period ended 3 October household purchases of pork increased seven per cent compared with the corresponding period in 2009. With continuing promotions on pork products there was a five per cent fall in the average retail price. However, as a result of the increased volumes total expenditure on fresh and frozen pork increased by one per cent to £187 million.

The number of households purchasing pork in the 12-week period fell marginally. However, those households who purchased pork bought larger quantities more frequently. There was a significant increase in household purchases of shoulder roasting joints, up by 78 per cent, as a result of recipe promotion by BPEX and celebrity chefs. Pork frying and grilling steak and pork belly were the other two cuts to show a significant rise in household purchases, up by 10 and six per cent respectively year on year. In contrast, purchases of roasting loin joints and leg roasting joints both fell by 11 per cent compared with the corresponding period a year earlier.

Despite a three per cent fall in the average retail price in the 52-week period ended 3 October expenditure on pork totalled £860 million, an increase of two per cent compared to the preceding 52 weeks. The volume of purchases increased by five per cent year on year.

The Outlook for UK Pig Meat Supplies

The 2010 June Agricultural Census was carried out with a revised methodology in order to move in line with EU regulations and to produce more detailed information on the structure of the industry. As a result of the census and the new regulations, smaller holdings were exempt from submitting information. The June 2009 results have been revised to be comparable with the 2010 results.

The new census information indicates four per cent fewer breeding females than previously thought. However, the trend in 2010 represented positive changes in the breeding herd compared with the revised data for 2009. Previous forecasts included the expectation of a continued expansion of the breeding herd although this has been tapered following increased grain prices and the expected extension of their duration.

As a result of increased feed prices, combined with the sharp (albeit seasonal) reduction in the DAPP, the breeding herd is assumed to stay static in December.

Total costs in producing one kilo of pig meat are estimated to have increased by 14 per cent since the start of January to average an estimated 155p per kg of pig meat produced in October (including finance and depreciation costs). As a result the negative margin between the DAPP and the estimated cost of production at week ended 16 October was 17p per kg.

With tighter margins the opportunity and incentive for producers to remove unproductive sows from the system will have increased. The continued trend of maintaining productive sows and bringing in younger stock should assist productivity and efficiency within the industry.

During the first nine months of 2010, clean pig slaughterings in the UK totalled 6.8 million head, five per cent more than a year earlier. Following challenging weather conditions at the start of the year and during the summer, throughputs were higher than expected with growth rates, rather than mortality rates, being affected. Additional costs during these periods were experienced by producers in terms of increased labour in order to maintain a healthy herd.

Live imports from Ireland during the first eight months of the year totalled 415,000 head, 41 per cent higher than the same period in 2009, boosting slaughterings and production in Northern Ireland.

Slaughterings for the final quarter of 2010 are forecast at just below 2.5 million head, resulting in 9.3 million head slaughtered in the calendar year. With a stable breeding herd anticipated the expansion in production in 2011 is expected to be just below four per cent with 9.6 million clean pigs slaughtered in the UK. Sow slaughterings are expected to be slightly below 2010 volumes at 206,000 head.

Consumption is expected to remain strong in 2011 with a rise of just over one per cent with the expansion in domestic pig meat production accounting for the increase. As a result the requirements for imports and the need to export will not alter greatly from 2010 figures.

November 2010