UK Pig Meat Market Update

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The March 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.

March 2017

UK PRICES

GB pig prices fell for the first time since February 2016 during January. The monthly-average EU-spec APP declined by less than 0.7p on the previous month’s figure, to stand at 153.85p/kg. A fall in pig prices usually occurs during the first month of the year, as consumer demand is subdued following the Christmas period. However, the fall this year was much more modest than the over 7p decrease that was seen between December 2015 and January 2016. As such, this year’s monthly average remained over 32p above the equivalent year earlier figure. Tighter supplies have helped keep the market largely in balance.

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The EU-spec SPP also showed a fall on the month during January, to average at 150.66p/kg. The price decline of over 1p was ahead of that for the APP, and so the gap between the APP and the SPP widened by 0.35p to average at 3.19p for the month. This suggests that premium pigs have been affected by the price decline less than standard pigs. Moving into February, the market has now showed signs of positive movement again. During week ended 18 February, the EU-spec SPP increased by 0.15p to stand at 149.81p/kg.

Carcase weights for both the APP and SPP samples reached record highs during January. The monthly average for the SPP sample stood at 84.32kg. This follows the long-term trend of increasing carcase weights, but was also likely influenced by reduced processing capacity during the Christmas and New Year period.

In contrast to finished pig prices, while there was some fluctuation, overall weaner prices rose marginally on the month during January. This reflects the tightness in supply in the market at present. The monthly average 7kg weaner price rose 13p to stand at £38.66 per head, while 30kg weaners saw a rise of 55p to £55.15 per head. Prices have not been at this level since August 2014.

EU PRICES

Following falls seen shortly after Christmas, there has since been some modest recovery in the average EU pig price. Prices increased by €1.70 over the past four weeks, to €152.55/100kg for week ending 19 February, following tighter supplies. However, there has been some volatility over this period. Prices at this stage last year were largely stable, so the premium over 2016 has widened over the past four weeks. Prices were almost €25 higher than the same week last year during week ended 19 February.

Prices in Germany, the most influential producing nation, actually showed a marginal fall of €0.15 to €156.10/100kg in the four weeks to 19 February. Tight supplies of live pigs here have so far this year not been reflected in price trends. This is because requirements from slaughtering companies have been limited following weak demand in the New Year. The German price fall has an impact on the overall average EU price, as it has the highest weighting in its calculation. In contrast, prices in Denmark were largely stable, while the overall EU price increase was driven by rises seen in France and Spain.

In euro terms, the UK reference price also increased in the four weeks ending 19 February. However, due to some strengthening in the value of the pound, this rise was not reflected in sterling terms. In the UK, prices have continued to be affected by the post-Christmas fall in demand. The strengthening of the pound also meant that the value of the EU reference price in sterling terms also decreased over the past few weeks.

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UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

While UK clean pig slaughterings in January were reported by Defra to be level with the calendar month in 2016, this was due to there being an extra working day in January 2017 compared with 2016.

When the slaughtering figures are adjusted so they can be compared on a like for like basis, they are seen to be over 5% lower than a year earlier at 849,600 head. Overall, this continues the trend of lower slaughterings seen in previous months, driven by the fall in the size of the breeding herd that occurred last year.

Sow slaughterings in January were 17% lower than in the previous year at 19,200 head. This is after figures were adjusted to account for the change in reporting methodology and extra working day in January 2017. This followed the trend seen in the previous month, possibly a result of the smaller breeding herd meaning there are fewer sows to be culled. Altogether, this meant that while pork production in January appeared to be level at 74,000 tonnes, this apparent stability was again due to there being an extra working day in 2017 and production on a like for like basis was actually 5% lower.

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In December, the volume of UK pig meat exports increased on the year for the first time since August. At over 15,600 tonnes, shipments of pig meat from the UK were 3% higher than December 2015 and the highest volume exported in the month of December since 1999. The overall increase can be attributed to a rise in shipments to the likes of Germany and Denmark, outweighing declines in volumes shipped to China, the Netherlands and the US.

At £22.2 million, the value of these shipments increased by 26% on the year, helped by further currency movements. Partly driving the overall increase was a rise in the value of shipments to China, despite a fall in actual volume shipped.

Despite fluctuations in the volume of UK exports during the final quarter, the amount of pig meat shipped during 2016 was 10% higher than 2015. At nearly 206,000 tonnes, this is the highest annual amount the UK has exported since 1999. The increase can be partly attributed to a 47% rise in shipments to China, which has overtaken Germany and Ireland to become the UK’s largest market in 2016. Exports to Ireland and Germany recorded more modest increases of 8% and 2% on the year respectively. Total export value climbed 28% on the year to nearly £252 million. Ireland remained the UK’s highest value market during the year. However, China’s share increased, overtaking Germany to become the second largest market in value terms.

UK offal exports declined on the year in December, with falls in shipments to South Korea, Denmark and Ireland. Nevertheless, full year exports of UK offal were 31% higher on the year in 2016, driven by increased demand from China and Hong Kong.

Shipments of bacon and other processed pig meats increased in December, while exports of sausages declined. Likewise, looking at 2016 as a whole, bacon shipments increased year on year by 3%, while exports of other processed pig meats and sausages fell by 4% and 33% respectively.

Imports of pig meat into the UK continued to rise in December, by 32% on the year at nearly 43,000 tonnes. The rise comes as Danish imports increased by 88% at 18,400 tonnes. Full year imports were 18% higher in 2016 at nearly 440,000 tonnes, again driven predominately by increases from Denmark. However, there is some doubt over the validity of the Danish import figures. The official Danish trade figures show exports of pig meat to the UK from January to November at just over 125,000 tonnes whereas the UK import data for the same period has a figure of 151,000 tonnes. Therefore, the UK import numbers should be viewed with caution.

FEED MARKET

Since 25 January, old crop UK feed wheat futures (May-17) have decreased by 1%, closing at £147/t on Thursday 23 February. Over the same timeframe, new crop UK feed wheat futures (Nov-17) gained 1%, closing at £137/t on 23 February.

Over the past two seasons, UK feed wheat prices have experienced a fairly unusual positive price carry, making old crop wheat more valuable in forward markets. This incentivised producers to carry their old crop into the next season to achieve a better price. However, this season, the relationship between old and new crop prices has returned to a more typical relationship. As such, old crop (May-17) futures are currently at a premium of £10/t to new crop (Nov-17) values.

The price relationship at present suggests a disincentive for growers to keep this year’s crop in store and rather to sell on the spot market. This season we have seen a tighter domestic wheat supply and demand situation, combined with a similar scenario in Europe, as well as currency volatility providing support to old crop wheat prices in the UK. However, the way markets are lining up at the moment suggests that the new crop market is running on the assumption that the supply and demand situation in the UK will return back to a normal balance, in the absence of evidence to the contrary. 

Driven by the rise in domestic feed wheat prices, the gap between imported maize prices and wheat prices has narrowed considerably since the start of the season (July 16).

As at 1 July, UK feed wheat (delivered, East Anglia) was at a discount of £33.50/t to imported maize (any origin, CIF optional ports). Nevertheless, as the season has progressed the gap between the two has narrowed, driven by rising domestic feed wheat prices. As at 27 January, the gap between the two price series had narrowed to just £3/t. While over the past couple of seasons, maize hasn’t really been a huge player in terms of a feed ingredient in non-specific diets, the relative price of imported maize to UK feed wheat may well impact usage decisions.

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Since 25 January, May-17 Chicago soyabean futures prices have fallen by 4%, to close at £376/t on Thursday 23 February. Following a similar trend, UK feed ingredient prices also decreased. Between 20 January and 17 February soyameal prices (spot, Brazilian 48%, ex-store, Liverpool) fell by 2% to £346/t on 20 January. Likewise, UK delivered rapeseed prices (spot, Erith) fell by 2% over the same time frame to £365.50/t on 17 February.

The fall in global oilseed futures prices has been partly driven by the pressure of record South American soyabean output, as harvest has started in Brazil.  In its latest monthly report, Conab increased its estimate for Brazilian soyabean output by 1.8Mt on the month. At 105.6Mt, the latest estimate is 11% higher than last season’s crop, which was effected by hot and dry conditions.

Furthermore, Australia produced 4.14Mt of Canola (OSR) from the recent harvest, according to the Australian Government. This is up 41% year on year and slightly higher than the previous record set in 2012/13. With nearly three-quarters of Australian Canola exported (previous 5 season average), the larger crop is likely to provide greater volumes for world markets.

Indeed, on Wednesday 15 February a large boat loaded with Australian Canola arrived in Liverpool. The last time the UK imported a sizeable amount of rapeseed from Australia was back in March 2002, when we imported 62Kt.

CONSUMPTION

The share of pork retail prices received by producers remained healthy during January, at 40%. This represented a small fall of less than half a percentage point on December. Nevertheless, substantially higher pig prices, relative to 2016, meant the share was eight percentage points higher than the same month a year earlier. Falling pig prices, coupled to a small increase in average retail prices, were responsible for the marginal decline in the producer’s share month on month.

Volumes of fresh/frozen pork sold by UK retailers in the 12 weeks ending 29 January were 3% down compared with a year earlier, according to the latest data from Kantar Worldpanel. This was despite average prices being back almost 1%. In contrast, the picture was more positive for added value products, such as sausages, which saw a degree of increase in the value of sales across the board. Meanwhile, primary beef and poultry meat sales volumes were higher year-on-year, likely helped by a 2% fall in average unit prices, though the value of these markets had still increased.

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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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