UK Pig Meat Market Update

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The February 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.

February 2017

UK PRICES

Following the trend from the previous 8 months, GB pig prices rose during December. The monthly-average EU-spec APP was up almost 2.5p on the previous month, reaching 154.54p/kg, the highest since October 2014. While tight supplies continued to support prices, the rise was more modest than in previous months. This was perhaps due to the strengthening of the pound during the Christmas procurement period.

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Increases in the EU-spec SPP were also more modest during December. The figure climbed just under 2p on the previous month to average at 151.70p/kg. This was the first time the monthly-average SPP was above 150p/kg since October 2014. This also meant the gap between the APP and the SPP widened by 0.26p during the month, to stand at 2.91p for week ended 31 December. Moving into the traditionally more difficult post-Christmas period, both price series have now begun the usual seasonal decline. However, prices have remained over 30p higher than year earlier figures. The SPP has fallen by more than 1p since the end of 2016 and stood at 150.60p/kg for week ended 21 January. The gap between the APP and the SPP has also continued to widen and stood at 3.12p for week ended 14 January.

Carcase weights fell on the month during December. The average weight of the APP sample declined by over three-quarters of a kilo from November’s monthly average, to stand at 81.82kg. However, this was over 1kg heavier than December 2015. While it is normal for carcase weights to fall at this time of year, as pigs are pulled forward for Christmas, the decline last year was smaller than usual. This may be due to the tighter supply situation currently in play. Moving into January, carcase weights increased once again. For week ended 14 January, the average weight for the APP sample stood at 83.57kg - the highest figure since the series began in 2014.

Weaner prices continued to rise during December. Following the trend of the finished pig market, the monthly average 30kg weaner showed a more modest rise than in earlier months. Rising nearly 70p on November, the figure stood at £54.60 per head. This was almost £14 more than the year earlier figure and the highest price since July 2014. 7kg weaners showed a more substantial increase on the month of over £1, bringing the average to £38.53 per head. This was around £8 up on a year earlier, and the highest figure since August 2014.

EU PRICES

The rises seen in the EU average pig reference price from November to December were short lived. While there has been some fluctuation, prices fell by €1.25 over the past four weeks to €150.85/100kg by the week ended 22 January. Prices though are still over €22 up on the same week in 2016. The sharpest declines in recent weeks were seen between week ended the 18 December and 25 December, when the Christmas procurement period would have ended and demand would have tailed off somewhat.

Prices in Germany, the most influential producing nation, saw a drop of over €10 in the three weeks leading up to 01 January. However, the price has since recovered somewhat, to €156.25/ 100kg for week ended 22 January, because of tight pig supplies. The overall fall in the German price is mainly due to pressure from slaughtering companies as they cut prices because their throughput requirement fell back. Overall price drops have also been seen in other major producers such as Denmark, Spain and Poland over the past month, despite varying degrees of strengthening in recent weeks.

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With sterling weakening against the euro, further pressure has been on the UK reference price. As such, in sterling terms the UK reference price recorded a decline over the past four weeks whilst other key producing states have seen increases.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

The volume of pig meat produced in the UK during 2016 was the highest since 2000, according to the latest data from Defra. Once figures were adjusted to account for the change in reporting methodology earlier this year, production edged less than 1% ahead of 2015, to reach 908 thousand tonnes. However, this small increase was influenced by the extra working day in 2016. The annual increase was almost entirely driven by the first half of the year, as production actually fell behind year earlier levels for the latter five months of 2016. Overall, throughput for 2016 was stable on the year at 10.6 million head. Conversely, sow slaughter was elevated for the year as a whole, up 3% on 2015 levels at 254,000 head. Average carcase weights were higher in 2016 relative to the previous year, averaging 82.2kg.

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For December, clean pig throughput was 6% down on the year, contributing to a 5% year-on-year fall in production. Sow slaughterings were also 9% below 2015 levels.

UK pork export volume declined 3% compared to the previous month in November, to 17 thousand tonnes. This followed lower levels of domestic production for much of the year and lower demand from the continent in autumn. However, the weakness of the pound meant that the value of shipments remained significantly higher than in 2015; up by a quarter at £24.2 million. The value of shipments to most major markets saw large increases compared to the previous year, however the value of shipments going to the US was lower.

The fall in volume was driven by lower shipments to some major markets in Germany, Denmark and the Netherlands. This lead to an overall decrease in exports, despite double digit increases to the two largest markets for UK pork, China and Ireland. Shipments to these destinations were up 25% and 12% respectively. Volumes to China continued to rise despite increased competition from the US and Brazil. However, the rate of export growth has slowed in recent months.

Further growth has been seen in shipments of offal from the UK; volumes were up 9%, while the value increased 60% on November 2015. This was driven by higher volumes going to China and the Netherlands, while volumes going to Hong Kong fell. Bacon exports were also positive during the month, increasing in volume by 25%. Exports of sausages and other processed pig meats were also higher than 2015. Despite the rise in the volume of sausage exports, the value declined, while bacon and processed pig meat export values rose.

Pork imports continued to be above 2015 levels during November, rising 25% to 43 thousand tonnes. This was largely driven by Danish shipments, which were up 66% compared to 2015. Volumes from Germany were also up by 16%. The weakness of the pound led unit prices to rise and the total value of these imports rose by over a half relative to 2015, reaching £88.3 million. The volume of all other pig meat products imported, with the exception of sausages, were also greater than a year earlier.

FEED MARKET

Since the middle of December (16 December), UK feed wheat futures (nearby) have gained 9%, closing at £148/t on Wednesday 25 January. As it stands to date (25 Jan), January is on track to be the sixth consecutive month that UK nearby feed wheat futures have gained on the year. The monthly average nearby UK feed wheat price for January is currently at £145/t, 32% higher than the same month a year ago

Furthermore, 2016 was the first calendar year that this price series has recorded an annual average gain since 2012, despite a fourth consecutive year of record global grain output. This is also in contrast to US markets, which saw another year of declines in 2016.

There is no denying that currency volatility, especially in the midst of Brexit, has helped to support UK prices. Since 23 June, we have seen sterling fall 10% against the euro and 15% against the US dollar, which on the surface has been supporting UK feed wheat prices.

However, it is not just currency volatility that has been influencing UK feed wheat markets this year. A tighter supply and demand situation domestically has also had its part to play.

In the first official Defra UK supply and demand update published in December, the wheat surplus available for either export or free stock was pegged at 1.85Mt, 55% lower than 2015/16. Furthermore, from July to November, the UK exported 987Kt of wheat, leaving 864Kt to either export in the remainder the season (December – June) or carry over into 2017/18.

Despite the tighter supply situation for wheat this season, demand for wheat for animal feed production is forecast to be 2% higher on the year at 7.219Mt. This is largely driven by a rise in poultry feed demand.

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Since 16 December, nearby Chicago soyabean futures prices have increased by 2%, to close at $388/t on Wednesday 25 January. Despite the overall increase on the month, the price series has fallen by $7/t from the peak seen on 18 January ($395/t). In sterling terms, the increase on the month was just 1%, mainly due to currency movements. Due to a combination of currency volatility and upward movements in global markets, UK feed ingredient prices have also climbed. Between 16 December and 20 December soyameal prices (spot, Brazilian 48%, ex-store, Liverpool) increased by 9% to £354/t on 20 January. Likewise, UK delivered rapeseed prices (spot, Erith) have increased by 3% over the same time frame to £372/t on 20 January.

The rise in global oilseed futures prices have been driven by a combination of factors, including weather issues for soyabeans. Heavy rains across parts of Argentina’s key soyabean growing regions has led to further concerns over its crop this season. This follows a reduction in area planted to the oilseed for harvest 2017, with maize and wheat cashing in on the extra acreage, driven by the scrapping of its export taxes on these two grains.

While the weather in Argentina is causing concern over soyabean output, South America’s largest soyabean producer, Brazil, is set for a record harvest this season at 104Mt (USDA). Furthermore, smaller South American producers, Paraguay and Uruguay, are also set for a year of record output. With this in mind, these increases in output could outweigh any loss in production from Argentina, restricting the impact in an already amply supplied global soyabean market.

CONSUMPTION

In December, farm gate prices increased for the tenth consecutive month to the highest level of the year. This rise, combined with a smaller rise in average retail price, led to the share of retail prices received by producers increasing to 40.4%. This remains the largest share received by producers since July 2014 and is nearly 7% higher than December 2015. Increases in GB pig prices during December were responsible for the overall increase in producer’s share.

The volume of bacon and added value products, such as sausages, sold by UK retailers in the 12 weeks ending 1 January (including the Christmas period) increased on the year, according to latest data from Kantar World panel.  However, pork sales remained subdued in the same period.

The amount spent on fresh/frozen pork over this period was down over 7% on the year, following similar trends seen over recent months. Pork volumes were again affected by consumers switching to other meats such as beef and poultry, with both recording increases in volumes sold. Volumes sales for bacon recorded a 4% increase on 2015, due to lower average prices, which meant overall spend was still down. Nonetheless, the total spend on sausages increased by 2%, driven by a rise in volumes sold and average prices.

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This pig meat sector UK market update was prepared by:

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Bethan Wilkins, Millie Askew & Mark Kozlowski
AHDB Market Intelligence

Phone: +44 (0)24 7647 8757/8968/8631

e-mail: Bethan.Wilkins@ahdb.org.uk, Millie.Askew@ahdb.org.uk, Mark.Kozlowski@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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