UK Prices

During July the DAPP averaged 152.46p per kg deadweight (dw), a marginal increase on the June price and four per cent higher than the corresponding month in 2010. However, the upward trend seen since February came to an end in mid-July and since then, the DAPP has weakened for six consecutive weeks, in line with the normal seasonal pattern. Demand for domestic pigs has eased back at a time when pig meat supplies, including of imported product, have been high. The DAPP stood at 148.05p per kg dw for the week ending 27 August, nearly five pence below the level of six weeks earlier but still five pence more than the corresponding week of 2010.

The premium for the UK pig reference price compared with the EU average has narrowed slightly to nine pence per kg dw in recent weeks, as the EU price has been broadly steady. This is somewhat less than the premium of over 16 pence a year seen at the start of the year.

Average carcass weights in the DAPP sample increased in July to 78.19kg and continued to rise during August, reaching 79.14kg in week ending 27 August. Carcass weights for July were up one per cent on June levels and marginally higher than the July 2010 average carcass weight of 78.05kg.

Weaner prices were relatively stable in the three months to July. The average 30-kg GB weaner price increased between June and July by just 11p to reach £45.83 per head. However, this July price is 12 per cent lower than year-earlier quotations for the same month. Recent developments have seen weaner prices fall by seven per cent to £42.63 per head in the week ending 27 August, as increased supplies due to improved productivity have not been matched by places available with finishers, who remained cautious given ongoing high feed prices and uncertainty over future prices.

The GB export specification sow price rose by two pence over the month to average 100p per kg dw in July. This is an increase of over five pence from prices seen in the corresponding month last year. In recent weeks, prices have continued to move upward, helped by a strengthening euro boosting export prices, standing at 104p per kg dw in the week ending 27 August 2011.

EU Prices and Exchange Rates

Pig prices in the EU have been relatively stable since the start of May, strengthening by one per cent between June and July, due to higher demand. The July average EU price stood at €157 per 100kg dw, five per cent higher than the corresponding month in 2010. Prices have fallen slightly in recent weeks, as the summer holiday season comes to an end and demand weakens seasonally. As of week ending 28 August, the EU average reference price stood at €156.04 per 100kg dw, a one per cent drop since mid July but nearly 16 per cent higher than prices seen at the start of the year. With high supplies in the market and further seasonal falls in demand, there is likely to be continued downward pressure on prices across Europe in the coming months.

The value of sterling against the euro has been somewhat stable at €1.13 to €1.15 since April and the August 2011 average against the euro was down six per cent on a year earlier.

UK Slaughterings and Pig Meat Supplies

During July, clean pig slaughterings in the UK totalled 943,000 head, 10 per cent more than the same month last year. Throughputs were up in all regions, with the largest increase seen in England and Wales, up by 11 per cent. Slaughterings in Scotland were up nine per cent, whilst in Northern Ireland numbers were up by five per cent. UK clean pig carcass weights during July averaged 76.7kg and showed little change compared with a year ago, although they were lower than any intervening month.

For the month, total pig meat production was 76,000 tonnes, up 10 per cent year-on-year. This meant that pig meat production during January to July 2011 totalled 471,000 tonnes, seven per cent more than the same period of 2010 with a similar rise in clean pig slaughterings.

Total imports of fresh and frozen pork during June 2011 were similar to those during the same month last year, increasing by less than one per cent to 35,000 tonnes. Volumes from the two main suppliers moved in opposite directions, with shipments from Denmark increasing by more than a quarter offset by a similar reduction in those from the Netherlands.

In the first half of the year, imports of fresh and frozen pork were six per cent higher year-on-year. The overall rise in shipments was driven by a significant rise of 44 per cent in the volume shipped by Denmark. Amongst other major suppliers, shipments from the Netherlands, Belgium and Spain fell, whilst volumes from Germany and Ireland increased and those from France were little changed. Bacon imports totalled 139,000 tonnes, down 15 per cent on the year, with volumes from all major sources down by a similar proportion. However, the real decline is probably less than this as Danish export statistics show an increase in shipments to the UK.

During June, UK exports of fresh and frozen pork increased by 27 per cent compared with June 2010, reaching 12,000 tonnes. Much of the growth was due to increased volumes being exported to the Far East, both to the main markets of Hong Kong and China and smaller markets such as South Korea, Japan, Singapore and the Philippines. Exports to EU member states rose by around 10 per cent. Over the first half of the year, exports of pork increased by 12 per cent to total 69,000 tonnes. Germany remained the largest market, following an eight per cent increase in volumes.

Feed Prices

Defra have released the provisional estimates of English crop areas at June 2011. The wheat area stood at 1.8 million hectares up nearly two per cent on last year. The barley area was four per cent higher at just over 600,000 hectares, although this was driven by a 17 per cent increase in the spring barley area as the winter barley area fell seven per cent.

Defra has released the provisional estimates of English crop areas at June 2011. The wheat area stood at 1.8 million hectares up nearly two per cent on last year. The barley area was four per cent higher at just over 600,000 hectares, although this was driven by a 17 per cent increase in the spring barley area as the winter barley area fell seven per cent.

As of 23 August, the UK winter barley harvest was almost complete with 99 per cent of the area harvested. The wheat harvest has continued apace with almost 70 per cent of the area now completed, with yields only slightly below the five year average.

Further afield, with the Russian harvest continuing and extending into Siberia and the Urals, the Russian Agricultural Ministry is confident that their forecast of 85 to 90 million tonnes of harvested grain will be adjusted upwards. However, the final size of the crop still looks uncertain as analysts SovEcon have reduced their grain crop estimate to 87 to 88 million tonnes.

A total of 58 million tonnes of Russian grain has been harvested so far, including 37.3 million tonnes of wheat. Since the export ban was lifted on 1 July, 4.4 million tonnes of grain have been exported from Russia, an 11 per cent increase on the previous year. This grain has been quality certified by Russia’s agricultural watchdog for export to Egypt, Kenya, Italy, Saudi Arabia, Israel, Spain, Greece, Tunisia and Mauritania. Russian grain exports are forecast to be 20 to23 million tonnes this year, compared to four million tonnes last year, when shipments were reduced by the export ban.

With winter wheat harvests in the northern hemisphere nearing completion, the International Grains Council, in its August forecast, increased the estimate of the global harvest for 2011/12 by three million tonnes to 677 million tonnes, the third highest on record. The forecast for world maize production was lowered by 10 million tonnes to 849 million tonnes, which would still be the largest harvest on record.

The forecast for world barley production meanwhile was increased to 133 million tonnes but remains well below the levels recorded in recent years. World production of soybeans is forecast to decline by 5.3 million tonnes to 258 million tonnes. This is largely due to a smaller US crop caused by hot and dry weather conditions. US production is at a three-year low of 83.2 million tonnes.

LIFFE wheat futures prices for November 2011 delivery averaged £164 per tonne during August, £1 per tonne higher than the July average. However concerns over the quality of the US harvest have led to prices reaching their highest levels since June towards the end of August. At nearly £172 per tonne, prices for UK wheat have increased over £8 since the start of the month.

Prices on other commodity exchanges have increased considerably recently with the French MATIF wheat price now €17 per tonne higher than at the start of August at €214 per tonne. American wheat and maize prices have also improved recently with CBOT wheat at $292 per tonne for December 2011 delivery up $27 per tonne since the start of August. CBOT maize prices have increased $33 per tonne to $303 per tonne for December delivery.

The fall in feed prices from the very high levels seen earlier in the year have reduced pig meat production costs. In August costs were estimated to be 11p per kg dw lower than the peak in March. Nevertheless, with the DAPP also falling, producers will, on average, still have made a loss of around £6 per pig in August based on latest estimates. With feed prices rising again, and the DAPP falling, the situation is likely to worsen in the coming months.

Consumption

For household purchases in the 12 weeks to 7 August 2011, Kantar Worldpanel data shows that fresh and frozen pork continued to be the best performing red meat, with increases, in both volume and value terms, by eight per cent compared to the same period in 2010. Expenditure continues to grow slightly behind volume purchases as promotional activity by major retailers has reduced the average price compared to last year. Roasting joints were the main drivers of increased purchases, with volume sales up 27 per cent year on year, and have been the focus of the recent promotional activity. All other cuts also had year on year sales increases except for steaks which fell by three per cent.

In the latest four-week period, fresh and frozen pork’s strong performance has continued with volumes increasing by five per cent and value sales by seven per cent year-on-year. Most cuts performed strongly, with roasting joints remaining the main contributors with volume sales up 18 per cent on year earlier levels. Pork continued to gain volume sales from other red meats due to its relative low price, especially at roasting joint level. Chicken’s average price has risen sharply during 2011 and this has increased the purchase volume gains pork has made from chicken.

Bacon has also continued its strong performance in the latest four weeks, with year on year increases in volume purchases of six per cent in the four weeks to 7 August 2011 and 10 per cent in the 12-week period ending on the same date. Around 40 per cent of rashers, which account for three-quarters of bacon sales, are sold through a promotion and this has helped to maintain its strong sales. Bacon joints also perform well, and have been added to some retailers' ‘3 for £10’-type promotions.

Purchases of processed pork products were also strong during the four weeks to 7 August. Sausages and sliced cooked meats both increased volumes by six per cent, whilst pork pie sales were up 22 per cent and chilled ready meals by 11 per cent in volume terms.