UK Pig Meat Market Update

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The April edition of our monthly UK Pig Meat Market Update is now available, providing the latest on prices, production, international trade, consumption and the feed market.

For previous editions of the market update please scroll to the bottom of the page where you can download PDF versions.

April 2017

UK PRICES

GB pig prices saw another small fall during February, with the monthly average EU-spec APP declining 0.66p on the previous month to stand at 153.19p/kg. However, with sharper falls occurring during this period in 2016, the price remained over 36p above the equivalent year earlier figure. Tight supplies helped to keep the market largely in balance during a period when demand is typically weak. Into March, the APP has now begun to increase slightly, reaching 153.72p/kg for week ended 11 March. With demand expected to pick up as the weather improves over the next few weeks, further buoyancy may be felt in the pig price. Especially as supplies are expected to remain tight.

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The EU-spec SPP followed a similar trend to the APP during February, declining by 0.91p to 149.75p/kg. The gap between the APP and the SPP widened further and reached 3.44p during the month as the SPP fell slightly more than the APP. The gap has continued to widen into March, even though both price series have seen some recovery.

The average monthly carcase weights for both the SPP and APP samples fell back slightly during February from the record highs reached the previous month.  The SPP sample averaged at 84.20kg, which was still slightly heavier than in the month last year, by just 90g.

Weaner prices showed diverging trends during February. 30kg weaners continued their upwards march, climbing 58p on the previous month to average at £55.73/head. This was the highest monthly price since July 2014. However, the figure has subsequently fallen back moving into March. In contrast, 7kg weaners showed a modest decline of 44p during February, averaging at £38.49/head. This was the first month-on-month decline since March last year, though the price has since been largely stable.

EU PRICES

Up to week ended 26 March, EU prices for pigs had remained relatively range-bound for the year so far, although that may now be starting to change. The EU average pig reference price was quoted at €157.81/100kg for this latest week (26 March), up €1.57 on the week before, and almost €28 more than the price a year ago. A stable market price had suggested that supply of pig meat was relatively well balanced with demand. However, a decline in the EU breeding herd from Dec 2015 to Dec 2016 of nearly 2%, and high weaner prices, are both supportive of a tightening supply picture. So, prices could receive a further boost in the coming months, when demand is also expected to pick up.

Signs of price recovery have been seen in a number of key producing states, with German prices gaining €2.62 in week ended 26 March to stand at €163.64/100kg. Spanish prices have seen an increase of over €8/100kg over the past four week period. Industry reports suggest that supplies of finished pigs have been behind demand from slaughterhouses, particularly in Spain where export demand is strong. Conversely, the market has remained more balanced in Denmark where prices have been largely stable.

The UK reference price has fallen in euro terms in recent weeks, due to some overall weakening in sterling. In sterling terms, the reference price actually showed some recovery, following from the tight supply situation currently in play.

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UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

UK clean pig slaughterings in February were 12% lower than the same month in 2016, at 769 thousand head, according to latest figures from Defra. This continues the trend seen over the past few months of a fall in throughput year on year. This is partly due to an assumed contraction in the UK breeding herd, which happened last year.

Once the figures were adjusted to account for the extra working day in February 2016, overall slaughterings were still down by 9%, while sow slaughterings recorded a decrease of 18% year on year at just under 18 thousand head. Similar to clean pig slaughterings, the trend in sow slaughterings follows the downward trend seen over the past months.

In February, carcase weights were marginally higher (400g) on the year at 83.9kg/head. Furthermore, due to the reduction in throughput and only a slight increase in carcase weights, pig meat production in February fell by 9% on the year at 67 thousand tonnes.

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Import of fresh/frozen pork continued to show strong year-on-year growth during January, with volumes growing 39% on the year to reach 39.2 thousand tonnes. Following the trend of recent months, this increase was largely due to a substantial 73% increase in imports of Danish pork. Doubts persist over the validity of this increase and AHDB are currently investigating the matter further.

Nonetheless, with imports from Germany, the Netherlands and Spain also showing growth on the year, it seems more imported pork arrived in the UK during January this year. Bacon, processed products and offal imports also showed growth on the year. Tight UK supplies have likely boosted imports, despite the devaluation of sterling decreasing the competitiveness of this product. Even in euro terms the import prices of both pork and bacon were still up on a year earlier.

FEED MARKET

Since 24 February, UK feed wheat futures (May-17) have risen 2% to close at around £149/t on Tuesday 21 March. Over the same timeframe, new crop futures (Nov-17) also risen, by 2.5%, to close at almost £140/t. The discount from old crop to new crop prices is now around £9/t, the largest since early March when the gap reached around £10/t.

At the beginning of March, Defra released the second official UK supply and demand estimates. The wheat balance sheet has been heavily influenced this season by increased demand from bioethanol companies for industrial uses and the poultry sector for animal feed.

 The poultry sector is one of the driving forces behind feed wheat demand this year, particularly for broiler diets. Production of both sheep and other sectors feed demand has also been stronger this season. However, with poultry diets comprising of around 60% wheat, growth in this industry affects this commodity more so than other grains.

This has led to the wheat balance for 2016/17 to be forecast at the lowest level since 2013/14. With exports between July and January at 1.16Mt and an operating stock requirement of 1.60Mt, the surplus available to export for the rest of the season or to be carried over into the next is relatively small, at 317Kt.

For barley, overall demand was unchanged on the previous estimates made in December, with a slight reduction to human and industrial demand offset by a similar increase in animal feed demand. The feed barley discount to feed wheat has increased further, with UK ex-farm feed barley prices (as at 16 March) £25.30/t lower than UK ex-farm feed wheat prices. This means that the inclusions of barley in certain diets, such as pigs and ruminants, are expected to be at relatively high levels for the rest of the season.

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Since 24 February, Chicago soyabean futures (May-17) have fallen by 2%, as the South American record harvest looms closer.  Between 24 February and 10 March soyameal prices (spot, Brazilian 48%, ex-store, Liverpool) increased by 1%, to £333/t on 10 March. UK delivered rapeseed prices (spot, Erith) have also increased between 24 February and 17 March, by 1%, to £359.50/t on 17 March.

 The discount of new crop rapeseed prices (Nov-17, Paris futures) to old crop (May-17) has widened further. The discount now stands at around £30/t and is the largest in the season so far. At this point last season, the discount was only around £2/t which suggests that market was already pricing in the tight supplies for 2016/17.

The large discount at present is essentially the market factoring in some bearish information that could influence new crop prices. For example, the large Ukraine rapeseed area and good conditions of the rapeseed crop across the EU. Furthermore, Germany’s farm association recently forecast its winter rapeseed crop at 4.86Mt in 2017 (up 5.6% year on year).

CONSUMPTION

The share of pork retail prices received by producers rose in February, averaging 40.5%. This represents half a percentage point increase on January and the largest share since July 2014. While the EU-spec APP lost 0.70p/kg on the month during February, the average retail price recorded a greater decline of 6.7p/kg. This lead to the increase in the producers share month on month. 

 The 12 weeks to 26 February were a mixed bag for pig meat sales, with some differences between categories, according to data provided by Kantar Worldpanel. Volumes of loin roasting joints and cuts pre-coated with marinades (a small part of the market) suffered the most, down year on year by 15% and 25% respectively. The news was brighter for mince (up 14%) and belly (up 11%). Bacon, the biggest category by sales, remain largely unchanged. Lamb continued to perform poorly in the period while beef sales were up over 2% compared with the same period a year before.

Across most categories, retail prices for pig meat for the period were quite stable for fresh/frozen pork, with only a few exceptions in other categories. Therefore, many of the volume falls also directly translated into falls in expenditure too. The retail prices of some added-value products rose in price, such as pork pies (up nearly 10%) and sausage rolls (up 6%). In the case of sausage rolls this did not impact the volume of sales. Spend on processed products overall did improve year on year in the period.

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This pig meat sector UK market update was prepared by:

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Bethan Wilkins, Millie Askew & Duncan Wyatt
AHDB Market Intelligence

Phone: +44 (0)24 7647 8757/8968/8856

e-mail: Bethan.Wilkins@ahdb.org.uk, Millie.Askew@ahdb.org.ukDuncan.Wyatt@ahdb.org.uk  

Twitter: @AHDB_Pork #PorkMarketNews

The United Kingdom pig meat situation and outlook is analysed in more detail in "Pig Market Trends", published monthly. For further information, click here.

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