UK Pig Meat Market Update

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The June 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.

June 2017

UK PRICES

In April, GB pig prices increased strongly, with the monthly average EU-spec APP gaining over 4p on the previous month to stand at 159.03p/kg. This was over 42p higher than in the same month last year. The APP has increased consistently week-on-week since the beginning of March, despite the potential for disruption due to a number of bank holidays. This highlights the currently tight supply situation driving the market. For week ended 20 May, the APP has risen to 162.66p/kg, the highest level since July 2014.

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The SPP followed a similar trend to the APP in April, recording a slightly larger 4.58p price increase on the month to average at 156.11p/kg. This meant the gap between the APP and the SPP narrowed during April. The gap was under 3p/kg for most of April, but has subsequently widened moving into May. For the latest week ended 20 May, the SPP stood at 159.21p/kg.

Average carcase weights fell on the month during April, with the SPP sample averaging 83.51kg, 400g less than the month before. Declining carcase weights early in the month helped offset increases recorded in the latter half, which were possibly influenced by the Easter bank holidays. Overall, this meant weights for the month were comparable to year earlier levels. Moving into May, weights have resumed a downwards trend, but are now above 2016 levels due to sharper declines at this time last year.

The GB weaner market also moved up during April, reflecting reports of shortages and developments in the finished pig market. 30kg weaners added £2.75 to average £58.21, while 7kg weaners recorded an increase of £3.79 to reach £40.50. Subsequently, the 30kg weaner price reached £59.78 for week ended 20 May; the highest price since records began in 2006.

EU PRICES

EU pig price growth became more subdued following Easter. The EU average pig reference price rose only €3.60/100kg in the four weeks ended 21 May, compared to over €13 in the four weeks prior. Despite this slowdown, at €173.89/100kg, the figure was still almost €35 higher than a year earlier.

Fewer slaughtering days, due to a number of recent public holidays, has likely brought processor demand for pigs more in line with supply. In addition, reports suggest that low temperatures on the continent have delayed the start of the barbeque season, weakening consumer demand for pig meat.

European pig meat must be able to compete on price on the global market, being in strong competition with product from the US, Brazil and Canada. Hence, while an eventual improvement in the weather may improve domestic demand, EU prices will also be heavily influenced by the level of export demand and there are already signs that EU product is losing competiveness.

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The UK reference price gained €1.03 in the four weeks leading to 21 May, reaching €184.89/100kg.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

At 785,900 head, April clean pig slaughterings were well below (-11%) year earlier levels according to the latest figures from Defra. This adds further confirmation to industry sentiments, that UK pig supplies have been tight since the start of the year. However, the extent of this decline will have been influenced by the later Easter holiday period this year compared to 2016. AHDB estimates indicate that the tight pig supply continued into May as well.

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Sow slaughterings also remained depressed during April, at 17,300 head. This was a notable 22% lower than April 2016. It’s worth noting, as for clean pigs, throughputs will have been affected by disruption in trade due to the Easter holiday period. Nonetheless, this continues the trend of the year so far, and supports the expectation that producers are no longer rationalising their herds as was the case last year. Altogether, these factors resulted in a 10% year-on-year decline in pig meat production during April, to 67,700 tonnes.

UK exports of fresh/frozen pork in March were 3% lower on the year at 19,100 tonnes, according to the latest data from HMRC. The fall in volume exported highlights the tight supply situation, of both clean pigs and sows, the UK has found itself in domestically since the start of the year. Yet export demand is thought to be relatively strong. While volume was down, the value of shipments in March was 26% higher compared to the same period in 2016, at £27.1 million, driven by a rise in unit prices.

Although China remained the largest destination for British pork, the amount shipped in March fell by 6% year on year to 3,900 tonnes. Likewise, exports to the UK’s fifth largest destination, the Netherlands, fell by 10% on the year to 1,400 tonnes. Nevertheless in March, the UK exported 7% more pork to both Ireland (at 3,200 tonnes) and Denmark (at 2,700 tonnes) and 6% more to Germany (at 3,000 tonnes), compared to the same period in 2016. UK export volumes of offal, processed pork and sausages were all lower year on year in March, while shipments of bacon increased.

Imports of fresh/frozen pork increased once again on the year in March, by 47%, to 44,500 tonnes. Similar to recent months the majority of the increase came from a 125% rise in shipments from Denmark to 18,300 tonnes. Doubts remain though over the validity of the rise, as Danish export figures have not been portraying the same trend.

However, volumes imported from Germany, the Netherlands, Spain and Ireland all rose, which would suggest an overall rise in imports of pork in March and yet the average import price was up 23% on March last year. This is likely to have been driven, once again by the tight domestic supply situation we have seen since the start of the year. Imports of bacon, sausages, processed pork and offal to the UK were also all higher in March, compared to the same period in 2016.

FEED MARKET

There is little doubt that weather is the word of the month for arable markets, be that too little rainfall in Europe or too much rainfall and snow in parts of the US.

UK feed wheat futures (Nov-17) increased by £3.70/t (2.7%) between 18 April and 24 May to close at £141/t. In response to weather concern futures had risen further mid-month climbing to £143/t on 12 May, a contract high, before falling back as rainfall hit the UK relieving potential crop stress. Paris wheat futures (Dec-17) fell by €2.75/t since 18 April to close at €171.25/t on 24 May

Similar relief was seen in Chicago wheat futures, with prices also climbing early in the month on concern of wet weather in parts of the US and snow in Kansas, peaking at $179.75/t on 2 May. The subsequent releases of US crop condition reports eased concerns, and the release of the USDA World Agriculture Supply and Demand Estimates (WASDE) helped to ease markets (read more below). Chicago wheat futures (Dec-17) closed down $1.56/t from 18 April to $171.85/t on 24 May 

As mentioned above the big data release mid-month was the USDA WASDE, which contained the first projections for 2017/18 The release highlighted total maize output is expected to decline by 31.4Mt in 2017/18 to 1.03Bt. However, global demand is projected to increase by 2.2% to 1.06Bt. End-season stocks are forecast at 195.3Mt, 12.8% lower year on year and the lowest since 2013/14. It is more meaningful to look at the stocks-to-use (STU) ratio rather than just stock levels in isolation. The maize STU ratio in 2017/18 is forecast at 18.5%, equal to that in 2013/14.

Global 2017/18 wheat production is forecast 2% lower year on year at 737.8Mt, but is the second highest figure on record. However total consumption is also expected to decline, only slightly, meaning that closing stocks for next season are seen 1.2% higher at a record 258.3Mt. The STU ratio for wheat is projected at 35.1% in 2017/18 up from 34.7% this season.

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Global protein markets moved down over the month (18 April to 24 May), but as with grain markets, started the month moving higher on weather concerns.  Rainfall in the US threatened to delay plantings of soyabeans which pushed Chicago soyabean futures (Nov-17) up to a mid-month high of $356.38/t. Chicago soyabean futures (Nov-17) closed at $348.3/t on 24 May, down $3.21 from 18 April.

Similar moves were seen in Paris rapeseed futures which felt the combined lift from delayed soyabean planting concerns and also the release of Canadian canola (rapeseed) stock levels, which were at their lowest level for the past four years at 6.6Mt. Paris rapeseed futures increased to €376/t on 8 May before falling back later in the month to close at €364.75/t on 24 May, as the release of the WASDE pressured markets.

As with grains, the USDA WASDE estimates that global soyabean output is to fall in 2017/18, with the new crop forecast at 344.7Mt compared with 348.0Mt in 2016/17. Consumption is forecast at 344.2Mt, 12.9Mt higher year on year. Subsequently, 2017/18 closing stocks are projected at 88.8Mt, 1.3Mt lower than 2016/17’s record levels. The global STU ratio is forecast at 25.8%. The global stocks level was higher than expected which added weight to the market.

UK delivered rapeseed prices followed the overall global downward trend. Rapeseed delivered into Erith (Spot) finished the month at £333.50/t (19 May), down £7.50/t from the 21 April.

CONSUMPTION

During the 12 weeks ended 24 April, primary pork volume sales were down just over 1% compared to the previous year, according to the latest data from Kantar Worldpanel. However a 2% increase in average retail prices meant that the value of sales was actually broadly stable over the same time frame. Nonetheless, with the important Easter weekend now included in the year-on-year data, Easter sales seem to have been less impressive this year.

Volume sales of pork leg and shoulder roasting joints recorded particular declines over the 12 week period, perhaps linked to reduced promotional activity this year. Loin roasting joints also saw a modest drop in volumes sold, but when combined with a 9% rise in average unit prices, the sales value was higher.

Pork was not the only traditional meat centrepiece affected by declining sales in the 12 weeks ended 24 April. Volumes of fresh/frozen lamb sold were 14% behind 2016 levels, a decline that was particularly driven by roasting joints. Conversely, primary beef sales remained positive, reporting a 4% growth in volume.

Warmer weather during April may have inspired more barbeques over the Easter period this year. Sales of pork sausages reported a 3% growth on the year during the 12 weeks ended 24 April. Non-promotional and Y for £X sales are reported to be driving growth in the wider sausage category.  While the Y for £X style of promotion has been in overall decline, it is still common in the promotion of barbeque products. The core barbeque season is now fast approaching, with the major retailers moving more barbeque lines into store. How this impacts pork sales volumes will be revealed over the coming months.

The share of pork retail prices received by producers increased by over one percentage point on the month in April, to 41.8%. Furthermore, this remains the largest share received by producers since July 2014.

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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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