UK Pig Meat Market Update

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The July 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 2018

UK PRICES

The modest uplift in UK pig prices, which began in mid-April, continued throughout May. However, momentum started to slow by early June. The average EU-spec GB APP in May was 2.40p higher than in April, at 151.02p/kg, as prices increased throughout the month. However, given the stronger price rises at this time in 2017, the monthly price was 12p lower than year earlier levels.

Prices typically rise throughout the spring as supplies tighten, however stronger rises might have been expected this year given the good barbeque weather. As such, the market seems more subdued than might have been anticipated. Although EU prices have recently moved up slightly, they continue to be well below those in the UK. This is likely continuing to exert some downwards price pressure, despite reasonably tight UK supply levels and decent consumer demand. By week ended 23 June, the APP has reached 152.87p/kg, and the gap compared to year earlier levels is almost 13p.

In contrast to the previous month, the GB SPP rose slightly more than the APP in May. The monthly average price climbed 2.62p to 148.17p/kg. This meant the gap between the two series was the narrowest since December 2016, at 2.85p. In early June the SPP has increased more slowly, standing at 150.03p/kg in week ended 23 June. This is 12p below year earlier levels.

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Carcase weights continued to fall seasonally during May and early June, and were relatively unchanged on year earlier levels. The average weight of pigs in the APP sample during May was 82.22kg, just 20g heavier than the year before. This is the first time since February 2016 that monthly APP carcase weights have not recorded a noticeable year-on-year increase. Standard pig weights remained higher, with the SPP sample average 800g heavier than the APP sample, at 83.02kg. This was 90g down on 2017 levels.

Diverging trends have been recorded on the weaner market. The average price for 7kg weaners in May was 72p higher than in April at £37.59/head, although this was over £5 down on a year earlier. Conversely, 30kg store pig prices were down by £1.39 at £50.10/head. This was nearly £10 down on a year earlier, reflecting the weaker finished pig market this year. This is actually the lowest monthly price since October 2016, when finished pig prices were also around 4p lower. Rising feed prices may be dampening the weaner market in recent months.

EU PRICES

During June the EU pig reference price was edging upwards until the most recent week, when a small decline was recorded. In the week ended 24 June the average price stood at €145.49/100kg, according to the EU Commission, which is a €2.37 gain on four weeks ago.

Prices in Spain have rocketed up in the past four weeks, gaining €7.70 over the period. Meanwhile, the Netherlands and Poland both recorded more modest price increases, of €1.65 and €2.60 respectively. Conversely, prices in both Denmark and Germany were broadly stable overall. The UK price has gained €2.20 since the end of May, to stand at €169.76/100kg. As prices in Europe on average increased slightly quicker than UK prices, the premium received by UK producers narrowed slightly, to around €24/100kg. This is still above the five-year average.

Prices in sterling recorded a similar trend to in euros, due to the pound remaining fairly steady over the past four weeks. In sterling terms, the EU average pig price has gained £2.09 over the past four weeks, to 127.46p/kg.

Reports suggest supplies have somewhat tightened over the past few weeks which has helped support prices. This has likely been influenced by the recent warm weather, which tends to slow growth rates. In addition, the start of the tourist season in Italy and Spain may provide some boost to demand there. However, in general, demand in Europe is reported to be below expectations, which may partly explain the fairly subdued seasonal rise in EU pig prices this year. An increase indemand for barbeque food in particular would typically support prices at this time of year.

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The outlook for the coming weeks remains cautious, with demand in Northern Europe potentially negatively affected by the upcoming peak holiday season. Export markets are also reported to remain challenging. Despite the recent price increases, over the past couple of weeks the difference between this year’s reference price and last year’s has remained reasonably steady, at around €31 lower. The summer peak therefore looks set to be significantly lower than in the past two years.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

The latest Defra statistics release indicates that the strong growth in UK pig meat production recorded in early 2018 abated somewhat in May. At 77,200 tonnes, output was 2% higher than year earlier levels. At 897,900 head, the UK clean pig kill was also up by just under 2%, a much smaller increase than in previous months.

The year-on-year growth in slaughterings varied somewhat between the different parts of the UK. Scotland recorded the largest uplift (+5%), followed by Northern Ireland (+3%), while growth from England and Wales was more modest (+1%).

The latest statistics release also contains some revisions to previous clean pig slaughter figures, going back to September. Most notably, there has been a considerable downwards revision (-30,400 head) to the April figure, to 877,900 head. This means April slaughter now stands 13% ahead of year earlier levels. Although, when the earlier Easter in 2018 is taken into account, on a like for like basis throughputs would only be 2% higher during the month.

The latest figures add weight to the view that supplies have been tighter in recent weeks, compared to the first quarter of the year when throughputs were up over 3% on 2017. This was expected, following difficult winter conditions and reports of disease challenges.

HMRC reported fresh/frozen pork exports fell in April, totalling 17,000 tonnes, a decline of 9% year-on-year. The fall in volume terms was tempered slightly by a 4% rise in the average value of shipments, reaching £1.35/kg. This meant that the total value of exports fell by just 6% on the year, to £23.0 million.

The value of exports was supported by an increasing proportion of shipments going to higher value destinations. Most notable was the 16% (+400 tonnes) growth in volumes going to Ireland, where prices averaged £2.40/kg. Around 90% of this trade is fresh/chilled product, which commands a higher price tag. Overall, trade with other EU member states rose by 2% (+200 tonnes) year-on-year in April, with exports further boosted by Germany (+600 tonnes), thanks to higher sow cullings this year. This was enough to offset declines to Denmark (-800 tonnes) and the Netherlands (-100 tonnes).

The modest export performance to the EU overall was set against a background of UK pig prices carrying a growing premium to EU prices. In week ending 25 March, UK pig prices were just over €19/100kg higher than the EU average, and this grew to over €22/100kg by the end of April. In May the premium grew again, to over €26/100kg, which may further hamper that month’s trade figures.

Exports to the main global markets recorded decreases overall, with fresh/frozen exports to China falling by 31% compared to April 2017, to 3,000 tonnes. Exports to Hong Kong fell too, also by 31%, to 800 tonnes. However, as lower value markets, the decline in market share did support the value of exports on a per kg basis. Exports to the US grew by 20 tonnes, notable as pork exports to this destination have the highest average prices at £3.27/kg. Trade to Japan also grew (+65 tonnes), as did volumes to the Philippines (+200 tonnes).

The unit value of exported offal fell in April by 9% year-on-year, to below £0.90/kg. This supported 1% (+60 tonnes) growth in export volumes, primarily driven by China and Vietnam. Nonetheless, total value still fell by 8% year-on-year, to £5.5 million.

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According to HMRC, the UK imported 2% more fresh/frozen pork during April than a year ago, following year-on-year declines earlier in 2018. Shipments picked up again from Denmark (+30%, 3,000 tonnes), but fell from Germany (-9%, 700 tonnes) and the Netherlands (-40%, 2,000 tonnes). Doubts remain over the accuracy of the data, with the Danish figure remaining somewhat erratic. Imports from Denmark during Q1 declined 30% according to HMRC, however the drop is nearer to 20% according to Danish export figures. Reflecting lower pork prices this year, and an increasing proportion of cheaper bone-in imports, the total value of UK reported imports of fresh/frozen pork declined by 8% on year earlier levels, to £69.0 million.

FEED MARKET

  • Grain market movements over the past month have been dictated by shifts in global weather patterns and international politics. Concerns over dry weather in parts of Europe, Australia, Russia and Ukraine resulted in new crop UK feed wheat futures reaching £161.70/t on 12 June. However, crop conditions improved in the American Midwest and some much needed rainfall arrived in Australia in the following week. These factors, combined with renewed trade tensions between the US and China resulted in the price of Nov-18 UK feed wheat falling back to £154.75/t, on 19 June.
  • A further escalation of trade tensions between the US and China also helped to put a cap on wheat market gains.
  • The Russian grain crop has been pegged at “up to 100Mt” by the Russian Agriculture Ministry. The latest forecast is significantly below the 135Mt estimate for last year’s crop and has been largely driven by late spring planting in the Urals and Siberia. Weather conditions have also been less favourable than last year for winter crops. It’s also worth noting that while other Russian forecasters also predict the 2018 crop will be smaller than 2017, their projections are some 15-20Mt higher than the Ministry forecast.

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  • On 15 June, the US confirmed the products that would be subject to tariffs, this was followed by a similar announcement by China. Under the proposal US soyabeans will be subject to a 25% import tariff from 6 July. As a result, US soyabean futures (nearby) fell to a more than two-year low on 21 June of $323.50/t. The Mexican government have also threatened to impose import tariffs on US soyabeans (www.oilworld.biz). Mexico is the second largest export destination for US soyabeans.
  • Showers in the US plains in recent weeks are reported to have benefited soyabean crops. Indeed, crop conditions (as at 24 June) are some of the best reported by the USDA for this stage in the season. However, reports suggest that some fields in South Dakota, Minnesota and Iowa are waterlogged and some crops could suffer if further rain materialises in the coming week (Reuters).
  • European rapeseed yield estimates have been revised down by an estimate 7% year-on-year by the European Commission, the second consecutive month of declines in yield estimates. Warm and dry conditions across Europe during May to mid-June affected the flowering stage
  • The Rosario Grain Exchange cut its estimate for 2017/18 Argentinian soyabean production by 2Mt to 35Mt. This was due to heavy rains during harvest, which caused widespread sprouting and fungal disease and led to heavy losses across the Pampas region. The wet conditions at harvest, combined with drought earlier in the year, means the crop is now 22.4Mt smaller than 2016/17.

CONSUMPTION

There was a pocket of positivity in the latest retail data from Kantar Worldpanel, covering the 12 weeks to 20 May. Sausage sales returned to growth, with volumes up 4.5% year-on-year. This translated into a nearly 8% growth in value terms, as average prices also increased. The sausage market has no doubt benefitted from recent good weather, encouraging consumers to use their barbeques.

Unfortunately, this level of growth was not reflected in the wider pig meat sector. Bacon sales remained virtually stable on the year, while volumes of ham sold recorded a modest decline. Fresh and frozen primary pork fell back too (-4% year-on-year), although rising prices ensured modest growth continued in value terms. This trend may have also been influenced by the warmer weather, as consumers turn away from roasts. Sales of leg roasting joints were down 3% in volume, despite falling prices, while volume sales of loin roasts were down nearly 30% year-on-year. However, the latter trend was also likely influenced by a substantial (30%) rise in average retail prices.

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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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