UK Prices

The deadweight average pig price reduced since mid- July and throughout August. This partly reflected the seasonal trend, but also the increased availability of heavier finished pigs and graded less lean during the month. Moreover, the uncertainty in the market during the holiday season is also likely to have had some impact on prices.

Despite some promotional activities, demand remained somewhat subdued, which will have put further downward pressure on prices. In first three weeks of August, the DAPP continued its downward trend and in week ended 21 August, the DAPP was 143p per kg deadweoight (dw) – four pence lower than the peak at the end of June.

The DAPP sample reported carcass weights of just over just over 78kg in June and July following a sharp decline from over 79kg, which occurred in May. This seasonal reduction in carcass weights was a result of slower growth rates during warmer weather combined with a residual effect from the cold weather earlier in the year. However, the average carcass weights increased consistently in the first three weeks of August to 79kg, similar to weights recorded a year earlier. Probe measurements also increased and averaged 11.2mm in July, 0.2mm higher than a year earlier. The probe depth continued to increase during the first three weeks of August to 11.4mm in week ended 21 August; the highest recorded this year to date.

Weaner prices also weakened since mid-July. The weaner market price declined almost four per cent in July compared with four weeks earlier to average £52 per head. The 30kg weaner price continued to fall in August and in week ended 28 August, it averaged £47 per head. Since peaking in May, the weaner price has reduced 13 per cent. The increased prospect of higher feed prices caused concern within the market and accelerated the decline in the weaner price although by the end of August the rate of reduction slowed considerably.

Since peaking in mid-March, the GB sow price recorded a week-on-week decline and by the end of July, it had fallen by almost eight per cent to 94p per kg dw, 15 per cent lower in comparison with same month last year. During the first three weeks of August, the sow price stabilised and also increased marginally following a re-adjustment within the UK industry following news of the closure of A and G Barbers. European sow prices continued at lower than year earlier quotations with Germany, Denmark and the Netherlands prices decreasing during the first three weeks of August.

Exchange Rates and EU Prices

Throughout July, the average EU pig reference price reduced by one per cent compared with a month earlier. The average monthly price in July was €149 per 100kg, almost five per cent lower than 12 months ago.

Prices movements were marginal in most major pig-producing member states during the end of July and the beginning of August.

However, despite a downward trend in July, the average EU price recovered marginally in the four weeks to 22 August.

UK Slaughterings and Production

UK clean pig slaughterings totalled 855,000 head during July, an increase of one per cent, or 11,000 head, compared with the corresponding month a year ago. Most of this increase came from Northern Ireland, where slaughterings increased 10 per cent to 144,000 head. England and Wales showed little change to last year’s slaughterings at 661,000 head, while Scottish slaughterings were five per cent lower at 51,000 head.

For the year to date, UK cumulative clean pig slaughterings totalled 5.3 million head, five per cent higher than 2009 despite the adverse weather conditions at the start of the year. England and Wales slaughterings increased 190,000 head over the first seven months of the year, while Northern Ireland recorded an increase of 113,000. Scotland, with almost 30,000 fewer, slaughterings were down eight per cent over the same period.

The weak sterling since autumn 2008 has pushed up import prices for pork and pork products on the UK market while at the same time contributed to good UK export demand. Despite still being historically weak against the Euro, sterling has, to some extent, recovered during 2010 and this has impacted on trade.

Over the first six months of 2010, total fresh and frozen imports declined by almost 12 per cent compared with the corresponding period a year ago to 166,000 tonnes. This was largely due to shipments from Denmark falling by 34 per cent year-on-year as Denmark diverted its exports to other markets, in particular to Germany and Russia. As a result, imports from Denmark accounted for only 23 per cent of all UK imports in January-June 2010 compared with 30 per cent in the same period in 2009. This fall was offset through increased imports from the Netherlands. Imports from the Netherlands increased one-third year-on-year to 33,000 tonnes.

Reduced shipments from Germany and Spain also contributed to the fall in imports during the first six months of the year.

In the first six months of 2010, UK exports of fresh and frozen pork were almost one-third higher compared with the same period last year, at 61,000 tonnes product weight. Increased exports have been predominately to Germany and the Netherlands, where shipments increased 19 per cent and 57 per cent respectively. However, trade with Ireland also increased significantly, up 59 per cent to 13,000 tonnes during this period.

Feed Prices

Throughout July and August, there one story dominated the grain and oilseed markets. Droughts and fires across Russia sparked crop losses and caused the government to place a ban on grain exports until the end of the year. With fears over a lack of grain exports from the Black Sea region and uncertainty surrounding production levels as harvest progresses across the rest of the northern hemisphere, global wheat prices surged to two-year highs. Estimates from the USDA at the end of August put Russian wheat production at 45 million tonnes, some eight million tonnes below the estimate made a month earlier and 17 million tonnes below the 62 million tonnes produced a year ago. In response to the export ban, the USDA cut its estimate for 2010-2011, Russian wheat exports from 15 million tones to only three million tonnes. With such a drastic reduction in wheat availabilities from the Black Sea, the shortfall must be accounted for elsewhere.

At the end of August, the latest estimate of US wheat production was 62 million tonnes, almost two million tonnes above earlier expectations. The key aspect of US wheat supply and demand is the level of stocks being carried into the 2010/11 season. The US is carrying 27 million tonnes into the 2010/11 season, which gives a total forecast availability of 88 million tonnes, which is two million tonnes above availabilities in the previous season. As such, there seems to be plentiful available wheat in the US to make up for shortfalls in the Black Sea. US exports are forecast at 33 million tonnes, over five million tonnes above estimations made in July; and almost nine million tonnes above the previous season.

In response to the supply events in Russia, wheat prices across the globe increased strongly. In Europe, MATIF futures price for November 2010 delivery increased €47 per tonne during July before hitting highs of €224 per tonne in early August. In the UK, the LIFFE wheat futures marker was very much a follower, hitting highs of £158 per tonne on 5 August. The LIFFE futures price for November 2010 delivery now stands at a £22 per tonne discount to the MATIF wheat futures price, making the UK very competitive in export terms. Countering the price discount, sterling has been on a strengthening trend against the euro over the past month which will slightly negate the UK’s export competitiveness in euro terms. Domestic physical prices also gained during July and August. By 12 August, the spot price for delivered feed wheat in East Anglia was quoted at £149 per tonne, some £36 per tonne above spot prices quoted at 9 July.

Soybean meal prices also increased, with support from the grain rally creating initial gains and a tightening in US supply supporting prices further. The next key issue for the meal market is the availability of beans to crush from the US harvest. In the UK, FEMAS soyameal, ex-mill Liverpool, was quoted at £310 per tonne on 13 August up from £300 per tonne a month earlier.

Consumption

In the four weeks ended 8 August 2010, the quantity and expenditure on pork increased by seven and two per cent respectively although the price reduced by five per cent in the same period. The longer term trend is similar with the quarterly and annual data indicating positive returns for quantity purchased and expenditure.

Demand in the most recent four-week period was driven by increased quantities of steaks and roasting joints purchased, although these cuts were discounted compared with a year earlier.

Pork continued to fare relatively well in comparison to other red meats and poultry although a greater amount of volatility was recorded for processed products. Fewer sausages and pork pies were purchased in the four week period to 8 August although chilled pork ready meal purchases increased considerably, possibly as a result of greater promotion at outlets.

September 2010