UK Pig Meat Market Update

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The May 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.

May 2018

UK PRICES

The price of finished pigs began to stabilise in March, following around six months of continual decline. The EU-spec SPP averaged 145.56p/kg during the month, just 0.27p down on February. However, with prices beginning to pick up this time last year, the gap compared to 2017 widened to almost 6p/kg. Into April, prices have remained broadly stable, with some decline at the start of the month counteracted by subsequent small rises. Prices would normally begin to increase at this time of year, in line with the seasonal trend, so further support might be anticipated. In the week ended 28 April the SPP recorded the largest weekly increase since last July (+0.55p), to stand at 145.82p/kg.

The EU-spec APP followed the same trend as the SPP in March, and recorded little month-on-month movement. At 148.54p/kg, the average was 0.36p lower than the previous month. As this was a slightly larger decline than in the SPP, the gap between the two series narrowed to 2.98p/kg, the smallest gap since last April. In the most recent week ended, the APP stood at 148.37p/kg.

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Carcase weights for the APP sample were relatively stable in March, averaging 83.42kg. While carcase weights normally follow a declining trend at this time of year, the drop between January and February was larger than usual, likely reflecting the poor weather conditions at the time. Compared to the previous year, the March 2018 average weight was 340g heavier, reflecting the long term trend towards increasing carcase weights as genetic performance improves.

In March, diverging trends were recorded in the weaner market. 7kg weaner prices averaged £37.68/head, 82p higher than in February although this has since dropped back again. Conversely, 30kg weaner prices decreased by 74p to £50.39/head. Both prices series continued to run below year earlier levels, by £1 and £6 respectively, reflecting lower expectations for finished pig prices. Reports also indicate finishing space has been limited, with poor weather conditions resulting in competition from indoor lambing. Limited availability of straw, and associated high prices, may also be having an impact on demand.

EU PRICES

The EU average pig reference price slipped during March, to €144.90/100kg in the week ending 1 April, down €3.70 compared to the four weeks previously, according to the EU Commission. Prices have fallen further in subsequent weeks, with the latest figure for week ended 22 April standing at €143.88/100kg. This is €26 below year earlier levels. The decline was not unexpected, as reports suggest demand for meat has continued to lack momentum.

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Of the key pig meat producing countries, France and Denmark recorded the largest declines over the past four weeks, dropping around €4 to stand at €131.00/100kg and €127.16/100kg respectively. All the other key producers, apart from Poland, also recorded price declines. The Polish price, meanwhile, recorded a gain of €1.52 over the same period.

The UK price also increased during the four weeks ending 22 April, to €165.52/100kg. This is increase was entirely driven by some strengthening of the pound, with the price remaining stable in sterling terms. Nonetheless, this means the UK premium over the EU-average price has widened in the most recent four weeks, reaching €21.63 Nonetheless, this is still narrower than the price difference recorded through the final quarter of 2017 and the first month of 2018.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

During March, UK production of pig meat totalled 75,500 tonnes, according to the latest data from Defra. This represents a decline both month-on-month and on the year, of 2% and 4%, respectively. However, it should be noted that there were fewer working days in March 2018, partly due to the earlier Easter. On a per working day basis, UK pig meat production was actually 5% higher than year earlier levels during the month; although this was still a 6% decline on February.

Driving the overall fall in production, March clean pig slaughterings declined by 3% (30,200 head) on the year, to 874,300 head. Although again, on a per working day basis, throughputs would be 6% higher than 2017 levels, but 6% below the previous month. For the individual regions, clean pig slaughterings in England and Wales declined 5% (33,000 head) year-on-year, while throughputs in Northern Ireland declined a more modest 1% (1,000 head). Conversely, Scottish slaughterings grew by 17% (4,000 head).

Carcase weights for clean pigs showed little change compared with year earlier levels, increasing by just 100g to average 83.4kg. The recent poor weather conditions may have somewhat limited carcase weight gain.

Sow and boar slaughterings remained steady month-on-month at 18,100 head, although this is a 16% year-on-year decline which somewhat limited overall pig meat production levels. Declining continental sow prices during the month, coupled with the earlier Easter, likely impacted throughputs.

Due to strong production during January and February, the decline in production in March is offset. According to Defra, total production for quarter one stands at 233,900 tonnes, 5% above year earlier levels. Slaughterings and pig meat production have been well above forecasted levels so far this year. This likely indicates that the herd has been performing better than anticipated, and the breeding herd has grown by more than the Defra census results suggested.

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High levels of domestic production in February helped boost UK pork exports by 10% compared to year earlier levels. According to HMRC, fresh/frozen pork exports reached 17,500 tonnes during the month. However, lower average unit prices led to a more modest 6% value increase, reaching £22.5 million.

The growth in volume terms was driven by an increase in shipments to other EU member states, which were up by 13% (+1,200 tonnes). Sales to Denmark, the Netherlands and Poland increased in particular, with much of this product likely to be re-exported. The narrowing gap between UK and EU pig prices during the month may have aided pork trade within Europe.

The international market was more mixed. Exports to China declined 8% (-260 tonnes) and Hong Kong shipments were down 15% (-124 tonnes). Nonetheless, other global markets increased; volume shipments to the US grew by nearly a third on the year (+105 tonnes) and trade with the Philippines (+244 tonnes) and South Korea (+115 tonnes) more than doubled. In contrast to last year, around 25% of pork exports to the US consisted fresh/chilled rather than frozen product during February. This boosted the value of pork exports to the US by almost 50% (+£965,000), which helped support the value of UK pork exports overall.

In contrast to fresh/frozen pork, offal exports recorded strong growth on the year during February to both China (+9%, +221 tonnes) and Hong Kong (+29%, +442 tonnes). Offal exports performed well in general; trade within the EU also grew by almost a third (+379 tonnes) meaning overall volumes were up 19%. In value terms, lower prices meant pig offal exports were worth 7% more than a year earlier at £6.7 million.

HMRC import data suggests the UK imported 13% less pork than last year during February. Lower shipments were recorded from most key suppliers, including Denmark, Germany and Spain. While doubts persist over the accuracy of the Danish import figures in particular, lower import levels seem likely given the high domestic production levels during Q1. In addition, the Danish, German and Spanish export figures also show a decline in shipments to the UK during January. As average prices have been lower, the value of UK pork imports was 17% lower than 2017 during the month, at £56.7 million.

Bacon imports continued to decline, reflecting a move towards processing more bacon in the UK. However, the reported 44% decline in shipments from Denmark so far this year may be somewhat overstated.

FEED MARKET

  • US wheat futures rose at the start of April over concerns of the continued severe weather in the country. Snow coverage in key spring wheat growing states of North/ South Dakota, Montana and Minnesota caused worries over potential delays in spring planting.  Chicago wheat futures (May-18) reached a high of $180.76/t on 10 April, increasing by $15.80/t since 27 March. However, prices sharply dropped off in mid-April after forecasts of rain in drought stricken US plains.
  • Cold and wet weather has delayed spring planting over much of Europe, according to the latest European Commission bulletin. However, despite the adverse weather stalling the growth and development of winter crops, the commission reports that there is no lasting damage.
  • Across the Atlantic, cold weather has continued to affect crop conditions in key Hard Red Winter wheat growing states. In Kansas (the largest US wheat planting state) 46% of wheat was rated as poor and very poor (USDA, 16 April). 
  • US wheat planting intentions were forecasted are up 3% on the year at 19.1Mha, according to the USDA’s prospective plantings (29 March). This is predominantly driven by an increase in spring wheat planting. This is, however, the second lowest planted area on record (since 1919).
  • US maize planting intentions are 2% lower than in 2017, at 35.6Mha. Compared with this, soya planting decreased by one percent, suggesting that soyabeans could win the fight for dirt.

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  • Trade worries between China and US have provided downward pressure on US soyabean markets this month. On 4 April, China released a list of 106 US goods upon which they are considering a 25% tariff on, which included soyabeans. This resulted in Chicago (May-18) prices falling by over $17/t. If the tariff comes into effect, this could add extra pressure on Brazilian supplies, China’s largest source of soyabeans.
  • Due to the persistent drought affecting Argentinian soybean growing regions since November, the USDA has revised its forecast for the 2017/18 crop down to 40Mt, the smallest crop since 2008/09.  Some rain did arrive in late March and into April, but for the bulk of soyabeans it was too late for wider recovery. As a result, it is likely that Argentina will become net importers for the 2017/18 season to maintain their crushing operations.
  • Both the USDA and Conab increased their soyabean production forecasts for Brazil to 115Mt, the largest on record (10 April). Nevertheless, this is not enough to offset Argentinian shortcomings.
  • According to Oilworld (www.oilworld.biz), the production of EU rapeseed crop stands at 22.2Mt, representing a three-year high. However, the German association of farm cooperatives has recently decreased its production forecast by 0.5Mt, to 4.62Mt. As Germany is the second largest producer of rapeseed in Europe, this could impact European rapeseed production.

CONSUMPTION

In the 12 weeks ending 25 March, retail sales volumes of fresh/frozen pork have declined by 2.5% year-on-year, according to the latest data from Kantar Worldpanel. Market penetration during the period declined by just over half a percentage point.  However, due to an increase of almost 4% in average retail prices, total value rose by just over 1%. Sales appear to have picked up more recently though, as in the 4 weeks ending 25 March, volumes rose by 1% on the same period last year. Market penetration during the 4-week period rose by three percentage points.

Shelf price is likely influencing consumers. In the 12 weeks ending 25 March the cuts with the highest average price increases (belly, loin roasting and shoulder roasting joints) also all recorded the largest declines in volumes sold. Conversely leg roasting joints, which recorded a 16% decline in average price, recorded a 35% increase in volume sold.

The performance of processed pork during the 12-week period was mixed. Bacon remained steady on the year in terms of average price, and recorded a 1.5% increase in volumes sold. Also, while pork sausages recorded a 4% rise in average price, volumes sold remained steady. Sales of ham were down 1.5%, with the average price rising by 2%. Altogether, this meant total pig meat sales during the period actually remained just ahead (+0.5%) of year earlier levels, while total value grew by almost 3% driven by an increase in average retail prices.

The producer’s share of the pork retail price in March stood at 39%, which is a fall of one percentage point month-on-month, according to estimates by AHDB. Currently the share stands around one and a half percentage points below year earlier levels. Farmgate prices remained reasonably steady in March compared with February, while average retail prices rose slightly. Since this time last year, both farmgate prices and retail prices have declined slightly, although farmgate prices have fallen more sharply.

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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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