UK Pig Meat Market Update

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The October 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.

October 2019

UK PRICES

The EU-spec APP for August averaged 155.57p/kg, half a penny higher than the month before and over 3p above year-earlier levels. Though still moving up, the increase was smaller than across the previous few months. Some flattening of EU pig prices, coupled with supply growth and subdued demand from the UK market has made further price growth challenging. Prices have remained stable in recent weeks, standing at 155.46p/kg in the week ended 14 September.

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The EU-spec SPP for the same month rose to 153.08p/kg, up by 0.7p on a month earlier. This was also a smaller rise than in previous months. The price has shown a similar modest rise going into September, averaging 153.75p/kg in the latest week ending 21 September.

The average weight of pigs in the SPP sample in August rose to 83.52kg, up by 100g on the month before. This was a similar increase to the previous month and in line with the normal seasonal trend. However, this was over 1kg heavier than last year. Cooler temperatures this year have provided better conditions for weight gain, and feed prices are also now falling, helping producers to market pigs at heavier weights. Reports also suggest some marketing groups are encouraging heavier finishing weights. Despite this, the average probe measurement fell to 10.9, down by 0.1mm from a month earlier and the same as in August 2018.

The 7kg weaner market reached a high point for the year so far in August, at £39.26/head. At this level, prices for 7kg weaners were around £1.50 above the same month in 2018. The 30kg weaner price for August also increased, to £54.31/head. This was about £1 higher than both the previous month and August last year. Producer intentions may have been boosted by the lower feed costs as well as rising pig prices. However, reports suggest a shortage of finishing accommodation, perhaps reflecting rising productivity and heavier finishing weights, is limiting the market somewhat.

EU PRICES

In the four weeks ended 22 September, EU pig prices continued to rise overall. Although, performances differed between countries somewhat.

In the latest week, the average price across the EU was €182.10/100kg, about €1.40 higher than at the end of August. Over the same period, the UK reference price rose by nearly €5, although it remained at a discount to the EU, at €173.61/100kg. The increase primarily reflects some strengthening in the value of the pound.

Lower EU production, despite widespread weak demand within Europe, is behind the continued strength in EU pig prices. Increasing import demand from Asia also provides some support. Nonetheless, altogether, processor margins have been put under pressure and this may dampen future price rises to a degree.

The fortunes producers have been more positive. For example, in Germany, reports suggest both breeders and finishers have been in profit since April. It is too soon to say whether this will halt the decline in the German herd, and production, which has underpinned so much of the price rises this year.

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UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

Defra slaughter figures for August show a 1% decrease in clean pig slaughter compared with a year earlier, totalling 938,500 head. However, one fewer weekday in the month this year may have influenced this decline.

There were some differing trends throughout the UK. Slaughter was 3% lower in England and Wales, but a 10% (+15,000 head) increase in Northern Ireland partially compensated for this. Scottish slaughter was also 10% (+3,000 head) higher than last year.

Overall, pig supplies for the first six months of the year were about the same as last year during the same period.

At 19,200 head, UK cullings of adult sows and boars fell by 19% compared with the same month in 2018. Despite relatively high cull sow prices, this was the largest annual decline since April 2017. A younger breeding herd was expected to lower the cull rate this year. However, such a large decline could also signal positive producer intentions, perhaps with expectations of improved margins. For the January-August period, sow and boar slaughter has fallen by 8% compared to last year.

The average monthly carcase weight increased to 84.2kg in August. This reduced the annual increase slightly, though it remained a substantial 1.4kg.

Despite a slight fall in pig numbers, the higher carcase weights meant that total pig meat production in August was similar to last year, at 81,900 tonnes.

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UK exports of pig meat (including offal) continued to grow in July, with an 11% increase year on year compared to 2018. This is the highest volume of July pork exports since 2016. The total value of the trade rose 19%, to £46.9 million.

Pig offal exports increased by 15% (+1,000 tonnes) compared to the previous year. This increase in exports is due to increased demand from China, which continues to be the largest destination for UK pig offal exports.

Bacon exports have gone down compared to July 2018 and are now lower in the year to date. However, bacon only accounted for 5% of total pork exports in July 2019.

Imports of fresh/frozen pork dropped by 22% (-20,100 tonnes) year on year in July, following a small increase on the previous month (+600 tonnes). Imports of bacon decreased by 10% (-1,700 tonnes) in July 2019 compared the previous year.

Processed pork saw the largest decline in imports reducing by 57% (11,000 tonnes) compared to July 2018. The HMRC data shows a significant decrease in the number of processed hams and shoulders imported from Ireland (-8,000 tonnes). However, volumes in July last year were unusually large. Compared to the 5-year average for July, processed pork imports from Ireland were down 37% (-1,900 tonnes).

The total value of UK pig meat (incl offal) imports during July was £196.1 million, down almost 5% year-on-year.

FEED MARKET

Grains

UK cereal and oilseed harvests had largely concluded in the week ending 10 September. We now await confirmation of a large cereal harvest, but indications point towards a 15.9Mt-16.2Mt wheat crop this year. The carryover of wheat stocks from last year’s harvest was the highest since 2015/16 adding to a large domestic supply, according to the AHDB/Defra end-season balance sheet.

Better grass growth this season has resulted in silage stocks at a higher level than last year going into winter. This should ease demand for feed cereals, provided winter weather remains benign.

Grain prices have started to push up from harvest lows but remain facing a large domestic supply. The latest corn returns (19 Sept) show UK ex-farm feed wheat (Sept delivery) has increased £4.60/t since the start of September to £127.60/t. This rise has filtered slightly through to UK ex-farm feed barley, which has risen £0.90/t to £113.00/t in the same period.

The release of the USDA supply and demand estimates (WASDE) report in early September highlighted US maize production at 350.5Mt, a drop of 2.5Mt from the August release. Weather remains a key watchpoint for the US corn crop, particularly this season as portions of maize acreages were planted later than expected.

UK feed wheat futures (Nov-19) and Paris grain futures (Paris maize and wheat Dec-19) moved higher over the month. UK nearby feed wheat futures (Nov-19) gained £6.25/t over the month closing on Friday 20 September at £136.00/t.

In July, the use of barley in animal feed fell 7% from June. This is also a 1.8% decline from July last year. This meant soya cake/meal overtook barley to become the third most used ingredient behind wheat and ‘other usage’. Imported maize remains relatively expensive compared to UK grain prices, and the usage of maize in feed fell 26% from June.

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Proteins

The latest Strategie Grains report puts EU rapeseed production down at 17.0Mt, a decrease of 3.0Mt from last year. As a result, stocks could potentially be tight throughout the season. This has led Paris rapeseed futures (Nov-19) to rise €6.00/t over the month (to 20 September). However, a stronger sterling has meant such rises have not filtered to domestic markets. Physical UK oilseed rape prices (delivered to Erith, November) over the month declined £6.50/t to £342.50/t up to Friday 20 September.

The USDA September WASDE revised soyabean production figures down further to 98.87Mt, a decline of 24.8Mt from last year. Soyabean price movements have largely been dictated by developments in the ongoing trade war between the US and China. Chicago futures (Nov-19) have risen $5.05/t through September.

CONSUMPTION

With over 70% of UK produced pig meat consumed in the UK, changes in the home retail market are key for the domestic pig sector. Overall GB retail sales of pig meat declined in the latest retail update, in contrast to beef and lamb.

In the 12 weeks ending 11 August, GB retail sales of total pig meat declined almost 4% in volume, and over 3% in spend, according to data from Kantar. Volumes of fresh and frozen primary pork recorded a marginal rise. However, fresh and frozen primary pork makes up around only a fifth of total pig meat volume sales. Within the primary pork category, shoppers turned away from the more expensive cuts of marinades and pork ribs, towards cheaper roasting joints, and mince.

Bacon, a large key category, has continued to suffer in the latest update, recording a 6.8% decline in volume. Bacon as a category is larger in volume than the fresh and frozen primary pork category.

Categories that which usually do well in summer have struggled this year, especially compared to last year’s heatwave. Cooked sliced meats (including ham), and sausages have both recorded sales declines in the latest period.

Looking at the other key proteins. Overall beef sales have been relatively static in the latest 12 week period. Lamb meanwhile has benefited from being on promotion, recording some strong growth. Fresh and frozen poultry has recorded declines of 2% in both volume and spend.

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This pig meat sector UK market update was prepared by:

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Felicity Rusk, Bethan Wilkins & Duncan Wyatt
AHDB Market Intelligence

Phone: +44 (0)24 7647 8818/8757/8856

e-mail: Felicity.Rusk@ahdb.org.uk, Bethan.Wilkins@ahdb.org.ukDuncan.Wyatt@ahdb.org.uk  

Twitter: @AHDB_Pork #PorkMarketNews

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