UK Prices

Pig prices continued their seasonal decline in September, with the DAPP reaching an average of 145.34p per kg deadweight (dw), a fall of two per cent from the August average. Annual comparisons, however, show that the DAPP was still nearly three per cent above year earlier levels. In recent weeks, the DAPP has begun to stabilise, earlier than in recent years, reaching 145.07p per kg dw in the week ended 22 October, seven pence higher than the corresponding week in 2010. The supply of clean pigs remains well above year earlier levels but demand from processors is beginning to rise in the run up to Christmas.

The premium for the UK pig reference price compared with the EU average has remained at about 6p per kg since early September. This is much lower than the premium seen for much of the last two years, which averaged around 16p per kg, although it is higher than it was during the spring, when UK prices were briefly lower than the EU average.

Carcass weights of pigs in the DAPP sample increased further in September, reaching an average of 79.8kg. This is one per cent higher than the August average and marginally higher than the September 2010 average. However, carcass weights have fallen slightly in recent weeks, reaching an average of 79.3kg by the middle of October.

Weaner prices in Great Britain weakened in September, with the average 30-kg weaner price falling to £41 per head. This September price was nearly six per cent lower than the previous month and 11 per cent lower than the September 2010 average. The fall was a result of weak demand from finishers due to a combination of high feed prices and uncertainty about future prices for finished pigs. However, during October prices have begun to creep higher as feed prices have eased back.

GB cull sow prices continued to strengthen in September and the beginning of October, driven by strong export demand. The September average stood at 105.5p per kg dw, more than two per cent higher than the August average and five per cent higher than prices seen a year earlier. Prices peaked in the week ended 1 October at 107.79p per kg dw, 47 per cent higher than the low prices seen in January 2011 but prices have since fallen back marginally.

EU Prices and Exchange Rates

The EU average pig reference price fell only marginally between August and September to stand at €154.82 per 100kg dw. This contrasted with the normal seasonal trend of declining prices, as demand was reasonable, helped by good export demand, and supply was subdued. The average price was seven per cent higher than in September 2010. In early October, the average price changed only slightly and in the week ending 16 October the EU stood at €155.18 per 100kg. Since then, prices in the EU have started to increase, led by developments in Germany, as demand rose while supply remained tight.

Although the value of sterling against the euro has fluctuated over recent weeks due to the uncertain economic outlook in both the UK and the Eurozone, the net effect of the fluctuations has been small and the average value of the euro against the pound has largely remained between €1.13 and €1.15 since April. The September 2011 average against the euro was down four per cent on a year earlier.

UK Slaughterings and Pig Meat Supplies

Clean pig slaughterings in the UK totalled 803,000 head in September. This was nine per cent higher than in September 2010. The largest rise in throughputs was in England and Wales, where numbers were up by 10 per cent, whilst slaughterings in both Northern Ireland and Scotland were five per cent higher than a year earlier at 127,000 and 49,000 head, respectively. AHDB estimates for September indicate that sow slaughterings remained substantially higher than year-earlier levels, totalling 20,000 head, a rise of 18 per cent year on year as producers continue to replace less productive sows.

In common with most recent months, the average UK clean pig carcass weight during September was slightly lower than a year earlier. The August figure was 78.0kg, which was 0.9kg lower than in the same month last year, with relatively high feed prices still encouraging finishers to send pigs to slaughter slightly earlier. The average carcass weight for cull sows was 154.1kg in August.

Total pig meat production in September was 66,000 tonnes, up eight per cent compared with the same month last year. This brought total pig meat production for the year to date to just under 600,000 tonnes, seven per cent higher than during the same months of 2010. With carcass weights no higher than last year, this increase was driven by increased throughputs, with clean pig slaughterings for the year totalling 7.3 million head, also seven per cent higher than last year.

UK imports of fresh and frozen pork during August 2011 totalled 30,000 tonnes. This was five per cent higher than in August 2010. Shipments from Denmark accounted for just over one-third of total volumes but were virtually unchanged from the same month last year, although this follows a large increase in imports from Denmark during July. Most other major suppliers of imported pork shipped larger volumes than in August 2010.

In common with the pattern throughout the year to date, bacon imports in August were lower than a year earlier. Volumes were down by two per cent to 23,000 tonnes. A fall in shipments from Denmark, the largest supplier, was offset by increased volumes from the Netherlands and Germany. In contrast, imports of sausages were up by 15 per cent.

UK trade figures for July have been revised upwards since last month. As a result, figures for imports of fresh and frozen pork for the first eight months of the year now show an increase of six per cent compared with the same months of 2010. The growth has been driven by a 36 per cent increase in shipments from Denmark. Germany and Ireland also recorded increased trade, but the Netherlands and Belgium shipped lower volumes. In contrast, bacon imports were down by 14 per cent year on year, with all major suppliers experiencing reduced shipments. Given that bacon consumption remains strong, this suggests that more imported pork is being cured in the UK.

Exports of fresh and frozen pork from the UK in August were 42 per cent higher than in August 2010 at 12,000 tonnes. Exports to most markets were up, especially Hong Kong, which took the largest share of UK pork trade for the second consecutive month. There were also dramatic year-on-year increases in exports to South Korea, as a result of the ongoing impact of the FMD outbreak there, and to Cyprus, which took much higher volumes than normal during the month.

Pork exports for the first eight months of the year were up 18 per cent on the same period last year, totalling 94,000 tonnes. Over the period, Germany remained the largest market, with shipments being five per cent higher than year earlier levels. Volume growth was seen in most significant markets, with only Ireland, the Netherlands and Italy taking less product.

Feed Prices

LIFFE wheat prices for November 2011 delivery have been stable over the last few weeks. During October, there has been a difference of only £5 per tonne between the lowest and highest prices of £146 per tonne and £151 per tonne, respectively, with the price for 24 October at £149.50.

DEFRA have published its provisional results for the UK harvest putting total cereal production at 21.8 million tonnes, an increase of four per cent on 2010 levels. This was driven by higher plantings of wheat and spring barley and generally better yields for most crops. Oilseed rape production increased 25 per cent to a new record of 2.8 million tonnes as plantings and yields were considerably higher year on year.

UK grain exports during August were generally lower, with wheat volumes falling 40 per cent year on year to 279,000 tonnes, while barley was 21 per cent lower at 122,000 tonnes.

The latest USDA forecast for US maize production was reduced by 1.6 million tonnes to 315.8 million tonnes as a result of a lower area harvested. However, US opening stocks increased giving 2011/12 ending stocks of 22 million tonnes, a near five million tonne increase from the previous month’s estimate. There was also an increase in estimates of 2011/12 Kazakh wheat production while Australian carry-in stocks were higher resulting in a forecast 2011/12 ending stock figure for wheat of 202.4 million tonnes up 7.8 million tonnes from the previous estimate.

Strategie Grains increased its latest estimates for EU grain production by 1.3 million tonnes to 282.8 million tonnes for the 2011/12 season, an increase of almost 10 million tonnes on the 2010/11 season. There was driven by higher maize production, as yields in Western Europe were better than expected. Wheat estimates were slightly higher, as increases in the French and UK harvests offset falls elsewhere.

It is forecast that Brazilian soybean production next year will reach a new record high of 75.2 million tonnes compared with 74.9 million tonnes in 2011; plantings have been aided by recent rainfall. The soybean planted area in Argentina is forecast to be half a per cent higher than the previous season at 18.6 million hectares. Added to this, near-term soybean demand from China is forecast to be lower than initial expectations. Therefore, the comfortable supply and demand balance is unlikely to be supportive of any prolonged price rallies unless driven by external market forces.

UK FEMAS soyameal prices, ex-mill Liverpool, were quoted most recently at £309.50 per tonne for October delivery, up £1.50 on the previous week. Rapemeal prices fell £7.50 per tonne to average £158 per tonne for ex-mill Erith.

The fall in grain prices from the very high levels seen earlier in the year have slightly reduced pig meat production costs, although the most recent falls are yet to be reflected in feed costs. In October, costs were estimated to be 10p per kg dw lower than the peak in March. Nevertheless, with the DAPP also at a lower level than in September, the losses being made by producers remained at around £12 per pig. The recent falls in feed prices could stabilise the situation, although further falls will be needed for producers to no longer be in a loss-making position.

Consumption

In the 12 weeks to 2 October 2011, fresh pork volume sales were unchanged compared to the same period last year, while value sales increased five per cent due to increased average prices. Increased household purchases of leg and loin roasting joints, up 32 and 10 per cent, respectively, helped maintain volume sales, driven by increased promotional activity. Shoulder roasting joints and frying/grilling cuts had reduced volume sales, down by 20 and four per cent, respectively. Sales of shoulder roasting joints decreased significantly year on year due to fewer promotions than in the corresponding period in 2010, when nearly 50 per cent were sold on price reduction promotions.

In the latest four-week period, household purchases of fresh and frozen pork were unchanged from a year earlier, while higher prices meant expenditure was nearly eight per cent higher. Frying/grilling cuts and shoulder roasting joints experienced decreased purchases in the latest period, down six and 15 per cent, respectively. Loin roasting joints were the best performing cut, up 23 per cent, while leg roasting joints also performed well, with purchases up six per cent compared to the same period last year.

In the latest four-week period, bacon had its first four-week year-on-year decrease in volume sales for over a year. However, over the last 12 weeks, household purchases were still nearly five per cent higher than the previous year. Sausages increased volume sales by four per cent. The warm sunny weather at the end of September led to increased sausage sales due to more BBQ occasions, within which sausages were the top protein featured.