UK Pig Meat Market Update

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The September 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.

September 2018

UK PRICES

GB finished pig prices continued to increase, albeit marginally, in July. The monthly average EU-spec APP was just a fifth of a penny higher than in June at 153.01p/kg, which is the highest price since last December. This was the fourth consecutive monthly price rise, though the gap between this year and last year’s price still widened to almost 15p. Overall, the market has been finely balanced, with stagnant demand levels, and relatively low EU prices, preventing prices from rising further. The onset of the holiday season commonly leads to a slight fall in demand and the APP did drop somewhat in early August, standing at 152.30p/kg in week ended 18 August.

The average SPP also increased in July, by a third of a penny, to stand at 150.27p/kg (EU-spec). As this was a slightly larger rise than for the APP, the gap between the two narrowed to 2.74p. This was almost a penny smaller than the gap a year ago. As with the APP, the SPP eased back in early August to stand at 148.71p/kg in week ended 25 August.

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The average carcase weight in the APP sample for July was 82.48kg, a 250g rise from the previous month’s average. This was also almost 400g higher compared to July 2017. Interestingly, however, the SPP sample experienced a 300g decline in weight compared to June, and was 300g below the same time last year. Diverging trends in the APP and SPP carcase weights are relatively unusual, and it is possible the very hot weather in July had some effect. It seems standard pigs were more affected by slowing growth rates, and hence reduced finished weights, this season.

In contrast to the finished pig market, there was slightly more momentum in weaner prices in July. The average 7kg price during the month increased by £1.43 compared with June, to £39.34, while the 30kg price rose by 45p to £54.76. These averages are, however, below year earlier levels by £5 and £6 respectively, following price falls in the second half of last year. The upward momentum did not continue into August, with both series declining by around £2 in the past 3 weeks, perhaps suggesting some softening of demand. Considering rising feed costs, this is not especially surprising.

EU PRICES

August was a month of two halves for the EU average pig reference price. At the start of the month, prices were still drifting downwards, falling to €143.36/100kg in week ended 5 August according to data reported to the European Commission. However, by the week ending 26 August, prices had risen by over €8, to €151.93/100kg. Compared to 4 weeks prior, the measure therefore currently stands €8.17 higher. Due to the recent price increases, the discount compared to 2017 has been narrowing, and currently stands at around €19/100kg.

Looking at individual member states, pig prices in Germany have increased strongly, reaching €159.39/100kg in the most recent week. This is €14.72 above the four weeks previously, with all the increase again coming within the past three weeks. Belgium, Poland, the Netherlands and Austria have also recorded a similar pattern of increase.

In Denmark, prices have only received a modest boost compared to that recorded in Germany, moving up by just €5.36 over the past 4 weeks, to €132.46/100kg. Prices in Spain also recorded little change during the period, up just €1.83 at €152.68/100kg, and French prices have similarly only risen slightly.

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The price rises in continental Europe are reportedly due to tight supplies at slaughter. While the German herd has been declining, previous census results from other member states indicate that overall, there should be plenty of pigs on units. As such, it is perhaps uncertain how long the upward momentum can be maintained. The ongoing African Swine Fever situation in China is also reportedly bringing some optimism to the market, with the potential for an uplift in import demand; this is highly uncertain however, and will depend on both the attitudes of Chinese consumers and strategy of the Chinese government.

Conversely, UK prices have declined over the latest four-week period, falling €2.79 to €164.65/100kg. The pound has very slightly weakened over the past four weeks, and therefore the decline is smaller in sterling terms (-1.1p) with the figure averaging 147.95p/kg in week ended 26 August. With the UK reference price and EU reference price diverging in trend, the gap between the two figures has narrowed significantly, to just over 11p in the latest week. This is the smallest difference since March, and lower than the five-year average. This is perhaps positive news for UK producers, increasing the relative competitiveness of domestically produced product. It remains to be seen, however, if this translates into any price support in the coming weeks.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

Despite reports of reasonably tight supplies, the latest Defra slaughter statistics indicate clean pig throughputs were 6% above year earlier levels in July, at 883,600 head. However, note there was one extra working day in July this year, which may account for some of the increase in throughputs; on a like-for-like basis the growth would be closer to 1%.

The overall increase was driven by slaughter in England and Northern Ireland, with Scottish throughputs declining 10% year-on-year during the month. This reflects disruption to slaughter in light of the CO2 shortage during July. Note the latest statistics release also includes a significant revision to Northern Ireland pig slaughter in December 2017 (+32,000 head), and smaller revisions for November 2017 and March 2018 (+5,000 head each).

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Supplies have certainly been more ample so far this year, with over 230,000 more clean pigs slaughtered. This is thought to have been driven by some previous breeding herd expansion and improved performance. The rate of increase has slowed on average since May though, with around 80% of the increase in throughputs coming in the first four months of the year. This reflects challenging disease conditions early this year and potentially also the recent hot weather slowing pig growth rates. As has been the case for much of this year, sow and boar slaughterings were above year earlier levels. The 11% growth for the month, however, is slightly below the 12% increase for January-July overall. Note this year follows a year of unusually low sow throughputs in 2017, driven by herd recovery following destocking in 2016.

Carcase weights declined for both clean pigs and sows. Clean pigs averaged 82.2kg during July, the lowest weight since last July when the average was 80.0kg. With higher sow throughputs countering the falling carcase weights, the net result was that pig meat production was still 6% higher year-on-year during the month, at 75,500 tonnes. Market prices remained flat in July, suggesting that the supply availability was broadly in line with demand levels. However, with the potential for supplies to pick up in the coming weeks, it remains to be seen if demand will follow suit.

HMRC reported fresh/frozen pork exports fell 7% year-on-year in June, to total 16,700 tonnes. The fall in pork exports was coupled with a slight 2% decline in average prices, to average £1.35/kg, meaning value fell by 9% on the year to £22.6 million. The overall decline was driven by falling export volumes to a number of key destinations. Shipments to China and Hong Kong both recorded notable declines, with exports down 19% (-630 tonnes) and 58% (-550 tonnes) respectively. Trade with Denmark and the Netherlands was also reported to be considerably lower than in June 2017, falling by 1,140 tonnes altogether. Product shipped to these destinations is likely often re-exported.

Nonetheless, there were areas of the pork export market that grew in June, despite the overall fall. Shipments to Ireland totalled 3,300 tonnes, a 9% increase on the year, while deliveries of fresh/frozen pork to Germany increased by 10% to total 3,100 tonnes. Pork exports to the high value US market also increased by 36% (+208 tonnes), to total 790 tonnes for June 2018. A number of smaller markets recorded a strong positive performance during the month too, including Poland (+290 tonnes) and Japan (+300 tonnes).

Exports of pig offal increased by 22% year on year to total 7,100 tonnes in June 2018. However, a sharp drop of 25% in the average price, to £0.81/kg, resulted in export value for the period declining by 9% to total £5.8 million. Offal exports to China, which accounted for nearly half of offal export volumes in June, increased by 55% to total 3,500 tonnes. Traditionally, the US is the largest pig offal supplier to China. The current tariffs imposed on US pig meat products will have therefore reduced competition between suppliers in the Chinese marketplace for these products in particular, providing an opportunity for UK exporters. 

According to HMRC, UK imports of fresh/frozen pork remained largely unchanged in June 2018, compared to the previous year, and totalled 40,900 tonnes. There have been developments in where the shipments originated from, however. Increased imports from Germany (+1,300 tonnes), Belgium (+670 tonnes) and Denmark (+360 tonnes) have offset notable declines from Spain (-940 tonnes) and the Netherlands (-670 tonnes). Average import prices fell 12% on year earlier levels in the month to £1.89/kg; as a result, the value of imports fell correspondingly to total £77.4 million.

FEED MARKET

The dry, fine weather meant that the GB harvest kicked off early this year, which has resulted in the harvest pace to be above average for most crops. As of 14 August, 75% of the total GB cereal and oilseed crop area had been harvested, which is at least a week ahead of harvest progress at the same point over the last five years. Some of the impacts from the challenging growing season are starting to become evident.

Grains  

  • The GB winter wheat harvest reached 80% competition as at 14 August according to the Harvest reports by ADAS. Wheat yields are estimated at 7.7-8.0t/ha, which is below the GB five-year average (8.2t/ha).
  • Meanwhile, the winter barley harvest was complete by the same date, with average yields estimated between 6.8-7.0t/ha, which is in line with the GB five-year average. As of the 14 August 35% of the spring barley harvest was complete.
  • Feed usage data released by AHDB and Defra show that grain inclusion in animal feed increased in 2017/18. Sheep feed production was up 15.4% on the year, most notably during April, where production was up 47% on the year, with stock having wintered badly, requiring additional spring feeding (read more here) . Feed production for cattle and calves was also up, 6.7% increase year on year (read more here) while pig feed production saw a 3.4% growth year on year.
  • With the prolonged dry spell increasing current forage usage, and putting pressure on winter supplies, cereal demand is likely to remain high in 2018/19.
  • Reduced production estimates added confirmation to the impact of the drought in Europe. On 9 August, Strategie Grains reduced its estimate of EU soft wheat (exc. durum) production by 4.7Mt, to 127.7Mt (141.8Mt in 2017). Meanwhile, it was reported that German grain production could hit a 24 year low , and French maize production was pegged 10% below 2017 .This will tighten EU grain supplies and could limit exports from the bloc.

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Proteins

  • Import demand for rapeseed is expected to reach a record 17.3 Mt in 2018/19 according to an Oil World report (www.oilworld.biz). This follows an anticipated increase in imports of rapeseed by China as a means to compensate for a forecasted reduction in soyabean imports, because of the ongoing trade disputes with the US.
  • Harvest progress of winter oilseed rape in GB reached 95% completion as at 14 August, according to the ADAS harvest report. Average yields are reported to be slightly below the five-year average, between 3.3-3.5t/ha, although is reportedly highly variable and on light and heavy soils is likely to be lower and higher respectively.
  • The USDA’s August forecast for the EU rapeseed crop was at 19.2Mt, a cut of 1.0Mt from its previous estimate. This is currently 468Kt below the EU commission’s production estimate, which was last updated on 26 July.
  • World oilseed production for 2018/19 is forecast at 603.1Mt in the August World Agricultural supply and demand estimates (WASDE) from the USDA. This is a 10.53Mt increase on the July estimate. The rise in production outstripped the 1.2Mt increase in global oilseed usage. As a result, ending stocks of the 2018/19 season are forecast to reach 199.9Mt, an increase of 8.25 from the USDA’s July estimate. The increase is due to higher production of soyabeans, sunflower seed, cottonseed and peanuts. This is partially offset by reduction in rapeseed production

CONSUMPTION

During the 12 weeks to 15 July, retail sales of pig meat* recorded a 1.4% rise year-on-year, according to the latest data from Kantar Worldpanel. With retail prices also increasing, this meant the total value of the category increased by just over 2%. This increase in volume was largely due to growth on the year in retail sales of bacon and sausages, up 1% and 4% respectively. Sales of sausages will likely have been supported by the ‘BBQ’ weather that was experienced across the country, especially since market penetration remained steady on year earlier levels. Unlike bacon, sausage prices were also higher than 2017 levels. So, the value of the sausage category increased by just over 5% year-on-year to an estimated £160 million, during the 12-week period.

Supporting the notion that the weather buoyed sausage sales is the increase in burger sales, which recorded a 19% year-on-year increase in volume sold. Aside from traditional barbecue foods, other buffet and picnic style products also seem to have received a boost, again perhaps related to the exceptional summer weather. Fresh pork pies recorded almost a 5% increase in sales volumes compared to the same period last year, and higher prices meant value climbed 9%. Sliced cooked meats (such as ham) also recorded increases in volume and average price, which combined to be worth almost 4% more than year earlier levels.

In contrast, primary pork has suffered under the heat, with volumes declining 1% year-on-year during the period. Although, due to a rise in average price the value of the category remained steady. Unsurprisingly, considering recent temperatures, leg and loin roasting joint volumes suffered, however shoulder-roasting joints bucked the trend with volumes up 5% year-on-year. With the warm weather continuing for several weeks after 15 July, retail sales of primary pork may have continued to face pressure, while BBQ products enjoy increased popularity.

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This pig meat sector UK market update was prepared by:

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Rebecca Oborne, Bethan Wilkins & Duncan Wyatt
AHDB Market Intelligence

Phone: +44 (0)24 7647 8631/8757/8856

e-mail: Rebecca.Oborne@ahdb.org.uk, Bethan.Wilkins@ahdb.org.ukDuncan.Wyatt@ahdb.org.uk  

Twitter: @AHDB_Pork #PorkMarketNews

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