UK Prices

The DAPP weakened in August to an average of 148.62p per kg dw, following the normal seasonal trend. This was a fall of three per cent from the July average but an increase of three per cent compared with the corresponding month a year earlier. This downward trend has continued in recent weeks as the supply of pigs for slaughter is high, whilst demand continued to be lacklustre. By the week ended 24 September, the DAPP had fallen to 144.80p per kg dw, over three pence down on the price four weeks earlier but nearly five pence higher than the corresponding week in 2010.

The premium for the UK pig reference price compared with the EU average has narrowed from around 11p per kg in early August to about 6p in recent weeks. 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 temporarily lower than the EU average.

Average carcass weights of pigs in the DAPP sample have increased seasonally since June to reach an average of 78.87kg in August. This was one per cent higher than the July average carcass weight, and marginally lower than the August 2010 average. The increase in carcass weights continued into September, with the average reaching almost 80kg by the middle of the month.

The weaner market in Great Britain weakened in August, with the average 30kg weaner price falling to £43.53 per head, as improved sow productivity has kept supplies high, whilst finishers were reluctant to take on increased numbers due to unrelenting high input costs and the declining of the DAPP. This August price was five per cent lower than the previous month and nearly 11 per cent lower than the August 2010 average. Weaner prices have now fallen for the ninth consecutive week and by the week ended 1 October stood at £40.38 per head, 10 per cent down on year earlier prices.

The GB cull sow price rose by nearly four per cent over the month to average 102.8p per kg dw in August, over seven pence higher than prices seen a year earlier. Strong export demand has continued to push prices up further in recent weeks and by week ending 17 September, the average price stood at 105.7p per kg.

EU Prices and Exchange Rates

The EU average pig reference price has been relatively stable in euro terms in recent months and fell only slightly between July and August, as despite high supplies there was only a small seasonal fall in demand. By cut, the ham market was the weakest. The modest decline has continued in the first few weeks of September, at a time when prices are normally falling more quickly. The August average EU price stood at €155.71 per 100kg dw, one per cent lower than the July average but three per cent higher than the corresponding month a year earlier.

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 remained stable at 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 765,000 head in August. This was six per cent higher than the figure for August 2010. The rise in throughputs was confined to England and Wales, where numbers were up by eight per cent. In contrast, slaughterings in Northern Ireland were little changed from a year earlier, whilst Scottish throughputs were down six per cent. AHDB estimates showed that in August sow slaughterings were up 13 per cent on year earlier levels at 18,000 head. In common with most recent months, the average clean pig carcass weight during August was slightly lower than a year earlier. The August figure was 77.7kg, which was 0.4kg lower than in the same month last year, as finishers continue sending pigs to slaughter slightly earlier because of high feed prices.

Total pig meat production in August was 62,000 tonnes, up five per cent compared with the same month last year. This brought the total pig meat production for the year to date to 533,000 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 to date totalling 6.5 million head, also seven per cent higher than last year.

Total imports of fresh and frozen pork during July 2011, at 27,000 tonnes, were eight per cent lower than the same month last year. Volumes from the largest supplier, Denmark, were up by five per cent but volumes from most other major sources were down. There was a particularly sharp fall in frozen imports, down by a third year on year, whilst fresh imports were only down by two per cent.

Bacon imports were down even more sharply in July, being 38 per cent lower than in July 2010 at 15,000 tonnes, with sharp falls in volumes from all three of the main suppliers, the Netherlands, Denmark and Germany. In contrast, imports of sausages were up by three per cent.

Despite July’s fall, imports of fresh and frozen pork over the first seven months of the year were up by four per cent year on year. This was largely driven by increased shipments from Denmark, the largest supplier, up by 37 per cent, while volumes from the Netherlands and Belgium were down by 16 and 15 per cent, respectively. Bacon imports were down by 19 per cent over the same period, totalling 153,000 tonnes. Volumes were lower from all of the major suppliers, although there are doubts over these figures as data from exporting countries show different trends.

July’s exports of fresh and frozen pork from the UK were 23 per cent higher than in July 2010 at 12,000 tonnes. Much of the growth was due to increased trade with Hong Kong/China, which more than doubled, making this the largest country market for UK pork exports in July. Exports to other EU countries were up by three per cent.

Pork exports for the first seven months of the year totalled 80,000 tonnes, up 13 per cent on the same period last year. Over the period, Germany remained the largest market, with shipments being six 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

A USDA report released on 12 September downgraded the maize crop by 11 million tonnes compared to previous estimates, putting it at 317 million tonnes. Yield estimates were further cut to 9.3 tonnes per hectare, the lowest since 2005/06. The smaller crop will be somewhat offset by forecast lower demand domestically and for export. There are also expected to be better crops in Brazil, Ukraine and the European Union, which should provide some relief. However global supplies are expected to remain tight.

The UK cereals harvest is now largely complete. Moisture levels were above ideal levels as the poor weather took effect, with the national average at 18 per cent and reaching up to 22 per cent in Scotland and the North East, meaning some drying has been required. Yields, at 7.5-7.7 tonnes per hectare for wheat and 6.1-6.2 tonnes per hectare for barley, are just below the five year average.

Strategie Grains have forecast EU wheat demand to remain stable at nearly 54 million tonnes for the 2011/2012 season. However with a greater proportion of the harvest comprising of quality wheat, medium quality wheat may be incorporated into feed rations and additional imports of feed wheat may also be required. EU imports of wheat are forecast to be 5.5 million tonnes, more than double 2010/2011 levels.

LIFFE wheat prices for November 2011 delivery have been fairly volatile over the past month peaking at £175 per tonne at the end of August but then falling significantly to stand at £151 per tonne on 30 September. French wheat prices have followed a similar trend, having peaked at €214 per tonne towards the end of August they have fallen considerably to stand at €185 per tonne. These declines have been driven by the falling US maize market.

16 September marked the start of the Brazilian soybean planting season but farmers are currently holding off planting until more rain arrives. Forecasts for planted area for the 2012 harvest are tentatively put at record levels to give a production figure of 75 million tonnes.

With the US soybean harvest about to start, market participants are awaiting further information regarding yields before making an assessment of prices. With the lack of new fundamental information, prices have been moving lower given a lethargic global economy and a stronger US dollar. The near-term outlook for soya holds little argument for a large scale movement of prices in either direction. UK FEMAS soymeal prices, ex-mill Liverpool, for September delivery were quoted at £309 per tonne on 23 September, down £13 over the previous two weeks, but little change on the month. Rapeseed meal prices were more stable, averaging £167 per tonne for ex-mill Erith.

The fall in feed prices from the very high levels seen earlier in the year have reduced pig meat production costs. In September costs were estimated to be 10p per kg dw lower than the peak in March. Nevertheless, with the DAPP falling more rapidly, the losses being made by producers increased to £9 per pig in August based on latest estimates. Recent falls in feed prices could stabilise the situation, although if the DAPP continues to weaken, producers are likely to remain in a significant loss-making position.

Consumption

In the 12 weeks to 4 September 2011, fresh and frozen pork increased value sales by seven per cent and volume sales by five per cent compared with a year earlier. Expenditure outgrew volume sales due to an increase in the average price of two per cent. Bacon performed even better, with purchases up by eight per cent year on year in value terms, and nine per cent in volume.

Leg and loin roasting joints were the main drivers of increased purchases of pork, and have been the focus of the recent promotional activity. Leg roasting joints increased volume sales by 30 per cent, whilst loin roasting joints increased 41 per cent. Chops and shoulder roasting joints decreased volume sales in the latest 12 weeks, down two and twelve per cent respectively. Shoulder roasting joints have suffered due to the heavy promotional activity on leg and loin roasting joints the major retailers have engaged in over the summer months.

In the latest four-week period, the amount of fresh and frozen pork purchased was four per cent lower than a year earlier, the first four-week period year on year decrease since March. Expenditure was up one per cent due to increased prices. Last August saw many price reduction promotions of pork roasting joints but there were fewer this year, especially for shoulder roasting joints. At the same time there were significantly more promotions this year on beef roasting joints that encouraged shoppers to switch. This led to significantly decreased volume sales of leg and shoulder roasting joints compared to last year, down 24 and 27 per cent, respectively. Loin roasting joints were the best-performing cut, up 16 per cent.

Bacon continued to perform strongly, increasing volume sales by 10 per cent year-on-year in the latest four-week period. Bacon continued to benefit from high levels of rasher promotions and increased purchase of bacon joints which feature in the majority of major retailers' 'three–products–for–£10' promotions. Volume sales of sausages increased by one per cent but have not been helped by the relatively cold weather during August which reduced barbecue occasions. Other further processed products performed strongly with pork pies up by nine per cent and sliced cooked meat by six per cent.