UK Pig Meat Market Update

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The January 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.

January 2018

UK PRICES

GB pig prices continued to drift downward during November, with the EU-spec APP averaging around 1p lower than the previous month, at 147.91p/kg. This was the lowest monthly pig price since October 2016. Nonetheless, prices were falling faster at the same time last year, so prices were only 8p lower than in November 2017, the smallest gap since March. There has now been a modest imbalance in supply and demand since August, though the consumer market for pig meat seems to be reasonable. Falling EU pig prices have likely played a significant part in the downward pressure. The market situation remained similar into December, with the EU-spec APP dropping a little further, to stand at 146.50p/kg in the first week of the month.

The gap between the APP and the SPP widened slightly in November, as the latter fell more significantly by around 2p, to average 143.57p/kg. The difference of 4.34p/kg was the largest since October 2015, suggesting that prices for premium pigs may have held up more than average in recent weeks. By the week ended 15 December, the SPP had fallen close to 142p/kg but the year-on-year drop was below 9p.

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The average carcase weight of pigs in the APP sample during November was over 84.2kg. This was around 100g higher than in October and half a kilo above November 2017. Poor demand from abattoirs has reportedly led to some delays in marketing pigs. Nonetheless, weights still peaked in early November before starting to fall as the key Christmas procurement period began. This boosted demand somewhat, although fewer pigs are thought to have been pulled forward ahead of the holiday shutdowns than previously expected. Carcase weights were well down on the year from August-September, but escalated again in more recent weeks. Reflecting the slightly higher carcase weights, the average probe measurement during November was 0.1mm higher than in October at 11.6mm.

The GB weaner market continued to record mixed trends, with prices for 7kg pigs broadly stable while 30kg pigs declined during the month. The average price of a 7kg piglet was £36.83/head in November, around 20p higher than the previous month, but over £4 below November 2017. A fall of over £1.50 was recorded for 30kg store pigs, to £47.06/head, over £8 down on the year.

EU PRICES

Having recorded sharp declines through September and October, EU pig prices finally started to stabilise from mid-November, according to data from the European Commission. By the week ended 16 December, the EU reference price averaged €135.82/100kg, 20 eurocents higher than four weeks previous. The price is around €8 below the same week of 2017.

The recent stabilisation in the price suggests that demand has shown signs of a seasonal uplift in the run up to Christmas. Indeed, Kantar data, based on GB retail figures, shows pig meat sales volumes to be up 0.7% year-on-year in the 12 weeks to 2 December.

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Mixed trends were recorded in prices across the EU. The prices in Germany and Netherlands have recorded little change over the past four weeks and as of the week ending 16 December, average €140.47/100kg and €121.19/100kg respectively. Meanwhile prices in Denmark in particular picked up significantly, gaining over €6 during the same period. Contrastingly, the price in Spain continued to fall slightly, by €0.53, and currently stands at €127.79/100kg. The Spanish price dropped below the Danish price from mid-November.

The sustained low price in much of Europe has led to an increase in exports into the UK; as such, the UK domestic price has continued to feel under pressure. In the week ended 16 December, the UK price averaged €158.99/100kg. The difference between the EU and the UK price is now just over €23. The gap has been narrowing in the last few weeks as the UK domestic price continues to fall. The pound has also been losing value over the euro slightly in the last few weeks amid Brexit uncertainty.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

UK pig meat production during November was 4% lower than a year earlier, at 83,100 tonnes, according to the latest figures from Defra. This is the second consecutive month in which production has been lower than expected, and follows 12 months in which production was generally growing rapidly. Poor demand from abattoirs has been reportedly limiting throughputs.

Clean pig slaughterings during the month were down 3% compared with November 2017, at 951,800 head. Although, this still meant average daily throughputs were the highest since August. Slaughterings in England drove the overall decline, falling 5% year-on-year, but there was some increase in both the Scottish (+49%) and Northern Ireland (+1%) kill. The large increase in Scotland reflects reduced operations in a major plant this time last year, following fire damage.

The lower slaughterings were emphasised by lighter carcase weights. The average clean pig carcase weighed 83.9kg during November, around 300g lower than a year before. This was the third consecutive month when weights have been lighter than 12 months earlier, but this follows particularly sharp increases last autumn. In more recent weeks data from the AHDB sample indicates weights have crept above 2017 levels, reflecting later marketing of pigs this year.

Sow slaughterings bucked the recent trend and were 2% below 2017 levels, at 22,400 head. This reflects the fact cullings this time last year returned to more normal levels, having been unusually low in the first half of the year. This month’s figure indicates there are still few signs that sow numbers are starting to fall, despite producer margins slipping into the red.

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For the first time in three months, UK pork imports rose strongly compared with a year earlier in October. Meanwhile, exports increased by a quarter, to 21,000 tonnes.

At 43,200 tonnes, fresh/frozen pork imports were 8% higher than in October 2017. This growth was largely down to an 18% rise in imports from Germany, mainly driven by frozen boneless product, and a 10% growth in purchases from Denmark. Volumes from the latter reached 16,300 tonnes, the largest monthly total for this year.

Average prices were much lower than last year (-9%), and so the value of pork imports was down 2% at £78.8 million. EU pig prices started to drop significantly at farmgate level during the month, while UK pig prices fell by less. EU pork therefore became increasingly price competitive throughout the month, which likely led to higher import volumes. This trend continued into November, and UK pig prices have remained comparatively high into December, so competition from imports has likely remained strong.

Similarly, bacon imports were 9% up on the year, at 20,300 tonnes. This was largely due to higher shipments from Denmark, although this may represent some correction in the import levels recorded, as volumes last year were unusually low. Imports of sausages were down on October 2017, but more processed products were imported.

UK pork exports in October were significantly higher than a year earlier. Sales to China doubled (+2,000 tonnes), likely a consequence of rising Chinese import requirements as African Swine Fever disrupts its domestic industry. Most other destinations also took more UK pork, with shipments to the Netherlands up over 50% (+700 tonnes) and trade with the Philippines almost trebled (+700 tonnes).

A 6% year-on-year fall in average prices meant that the value of exports was only up 19%, at £27.9 million. Interestingly, the average price of shipments to China bucked the trend and increased by 2%, again indicating improving import demand in this region.

Cured and processed pig meat exports were also higher, mainly due to increased sales to Ireland. October was also another good month for UK pig offal exports, which were 22% higher than a year before, at 9,500 tonnes. This was led by a 65% increase in shipment to China, which offset a more mixed performance amongst the other significant markets.

FEED MARKET

Grains

Wheat markets drifted sideways early in the month, with a limited amount of market-shifting news. Towards the end of the month, shifts in currency provided some support to markets. This was especially true for UK feed wheat futures (May-19), which were driven by Brexit negotiations. The latter will continue to be watched closely. US prices also rose overall during the latest period due in part to US and China trade talks at the G20 summit, and positive outlooks for US export potential. Elsewhere, the Argentinian wheat harvest is progressing slightly behind last year, according to the Buenos Aires Grain Exchange (BAGE). As at 6 December, only 36% of the crop was rated as good or in excellent condition, compared to 58% at this stage last year.

At a European level, EU-28 wheat exports continued to be forecast at 20.0Mt by the EU Commission last week (3-7 December) (21.3Mt in 2017/18), despite the organisation increasing its estimate for the 2018/19 crop. While output is still sharply below last year’s level, combined with a hike to the maize import forecast (up 2.2Mt from November), it does point to a slightly less tight European grain supply situation than previously forecast.

In the UK, wheat availability in 2018/19 is expected to remain historically tight, despite a drop in demand from the bioethanol sector. The first official estimates of UK supply and demand from AHDB peg the surplus available for free stock or exports at just 800Kt. Although 233Kt higher than in 2017/18, this is still well below the previous five-year average of 1.95Mt (read more here).

Looking ahead, early GB planting intentions for the 2019 harvest suggest a 4% year on year rise in the wheat area, the highest area for five years (AHDB Early Bird Survey). A combination of good autumn drilling conditions for many and higher pricing has encouraged more planting of winter crops, including winter barley and oats.

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Proteins

Oilseed markets saw mixed movement over the latest period. Chicago soyabean futures (May-19) rose by $12.12/t on the month (23 November – 11 December), bolstered by hopes of a resolution between the US and China following the Buenos Aires G20 summit.

Elsewhere, the anticipated size of the 2018/19 Brazilian soyabean crop has been raised by 1.1Mt to a record 121.4Mt, by consultancy firm AgRural. With a big crop forecast, development in weather conditions over the country will be watched closely.

Rapeseed markets were largely flat on the month. The Australian government has forecast canola (oilseed rape) production to fall by 39% year-on-year to 2.2Mt. On average over the past five seasons, Australia has accounted for around 17% of global oilseed rape exports. This may be reduced if this production estimate is realised.

On the continent, French consultancy firm Strategie Grains has made a further reduction to the projected EU rapeseed area for 2019. The EU rapeseed area is now forecast down 12% from 2018, with challenging dry establishment conditions the leading factor. This follows significant rapeseed area falls of 24% and 18% anticipated in Europe’s two largest producers, France and Germany. Additionally, ongoing low water levels on the Rhine has limited demand for rapeseed oil on the continent. Difficulties in transporting raw rapeseed to biodiesel refineries and subsequent shipping of the finished product are causing significant problems for refineries based along the waterway. As a result, attractive biodiesel margins on the continent are unlikely to translate into support for rapeseed prices.

In the UK, the provisional results of AHDB's Early Bird Survey of UK cropping intentions for 2019 include a 3% reduction in the rapeseed area. Dry conditions in early autumn hindered crop establishment, with the difficulties compounded by cabbage stem flea beetle damage in some regions. This is highlighted in the first ADAS Crop Report of the 2018/19 season, released on 4 December.

CONSUMPTION

The fresh primary meat and poultry market was already responding to Christmas by expanding itself in the 12 weeks to 2 December, according to Kantar Worldpanel. However, the festive spirit did not permeate all sections of the meat market across the period.

Total primary meat recorded 0.5% year-on-year growth in sales volumes, however declines in average price meant total spend was actually down 0.7%. Meanwhile, processed products were reported to be recording a slowdown after a strong performance last summer, with bacon in particular under pressure. Sales volumes were down 1.6% on year earlier levels, with prices also 4% lower. It is expected that bacon will see an uplift in sales, as Christmas gets nearer, though how this compares to 2017 remains to be seen.

Red meat has also struggled somewhat recently, within the overall meat category. Fresh & frozen lamb and beef sales both recorded year-on-year declines in volume across the period, of 1.5% and 2.4% respectively.

Nonetheless, fresh & frozen pork sales bucked the trend, increasing by 2.9% on the year, largely supported by chops/steaks and shoulder roasting joints. This meant that overall, total pig meat* sales recorded a modest increase in volume of 0.7%, though a significant decline in average price meant that total spend was down 1.7%.

*encompasses primary, bacon, sausages, sliced cooked meats, chilled main meal accompaniments, ready to cook, pulled pork, pork ribs and burgers and grills.

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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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