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

Pig prices continued on a downward trend as 2017 closed. The EU-spec SPP averaged 150.76p/kg during December, down 2.49p on the month. This meant the monthly average moved to almost 1p/kg below year earlier levels, having been higher for the rest of 2017. In the New Year, despite one week of respite, the SPP has remained on a downward trend and fell almost 3p in the first four weeks of the year. For the most recent week ended 27 January, the SPP stood at 146.83p/kg.

The average EU-spec APP for December was 154.17p/kg. This was just over 2p back on November, and so the gap between the APP and the SPP widened to 3.41p. The more modest decline in the SPP suggests the market for premium pigs was slightly less subdued in the latter part of last year.

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The average carcase weight for the APP sample in December stood at 81.99kg. This was well below the highs of the previous two months, and the lowest carcase weight since June. Compared to year earlier levels, the monthly average was only fractionally above year earlier levels, also a stark contrast to previous months where weights had been over 2kg higher. This may be partly due to poorer growing conditions in December as a result of the cold weather. Following from this, probe measurements also decreased to average 11.3mm. However, some fall in carcase weights is normal in December as producers market pigs early ahead of the festive period. In January, weights have been increasing again as throughputs return to normal.

The average 30kg weaner price dropped £2.93 in December, to stand at £52.69/head. This was the lowest monthly average since October 2016, and £1.91 below year earlier levels. 7kg weaners also continued on a downward trend, falling 73p to £40.40/head. This was £1.87 below the same month in 2016. Both categories have continued to record price declines into January, as uncertainty remains over the finished pig market in the spring.

EU PRICES

Last year did not end well for European pig producers, with declines in the EU average reference price. In each of the four weeks to 31 December 2017 EU pig prices dropped, to close the year at €139.67/100kg, a €5.76/100kg fall over the given period. The decline has continued in the New Year with prices in the most recent week ended 28 January averaging €133.86/100kg. Although these seasonal price pressures are typical for this time of the year, with a large supply and a repressed demand, the latest price is down almost €18 on 2017 levels.

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At country level, price deflation was seen across almost all member states, with continual price drops recorded over the past few weeks. The German pig price recorded one of the largest declines, standing €6.95/100kg lower than 4 weeks prior to week ending 28 January 2018. Denmark recorded a price fall of €5.90/100kg, while the French price fell €5.00/100kg. In contrast, the Spanish price recorded a much less drastic decline over this period, of €2.50/100kg.

In contrast, thanks to some strengthening of sterling in relation to the euro, the UK reference price has actually been moving upwards over the past 2 weeks. Although, at €165.67/100kg for week ended 28 January, the price is still over €2 below 4 weeks ago. Modest gains in the UK pig reference price in euro terms mean the gap between the UK and EU average reference price has been widening, almost reaching €32 in the most recent week. This will likely pressurise UK prices moving forwards.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

The latest figures from Defra indicate that production tightened up again in December. Clean pig slaughterings were 6% behind year earlier levels during the month, totalling 803,300 head. While this will be partially attributable to the extra working day in December 2016, compared to 2017, ongoing problems with plant reliability may have also limited throughputs. The new figures, which include some upward revision to slaughterings in previous months, mean the total clean pig kill for 2017 stood at 10.38 million head, 2% behind the previous year.

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Adult sow and boar slaughterings remained behind year earlier levels in December, totalling just 14,100 head, 17% lower year-on-year. The annual decline is partially exaggerated by the extra working day in December 2016. However, reports also suggest producers are increasingly reluctant to process their sows during the holiday period. For the year as a whole, adult pig cullings totalled 228,000 head, 10% fewer than during the previous year.

Altogether, production fell in line with clean pig slaughter during December, declining 6% year on year to 68,200 tonnes. However, if the extra working day in December 2016 is accounted for, the annual decline would be closer to 1%. Annual production therefore totalled 897,900 tonnes, 1% lower than in 2016. This decline was minimised by the notably higher carcase weights recorded earlier in the year.

Official UK trade figures for November showed a substantial decline in both imports from and exports of pork to, Denmark. Such a decline is unlikely to represent reality, and as such the trade figures for the month should be viewed with caution. HMRC are currently querying the figures, so revisions may be made in the coming months.

National trade data from the UK’s top seven suppliers of fresh/frozen pork suggest shipments to the UK were 2% higher year on year during the first three quarters of 2017. Growth was present throughout the year, with volumes during Q3 just over 1% up on 2016.

Exports of UK fresh/frozen pork to China continued to be affected by a slowdown in demand, and declined by 27% on the year during November, to 2,700 tonnes. Exports to Ireland were also down by almost a third at 2,000 tonnes. However, there was some modest growth in shipments to Germany, which gained 4% on November 2016 to reach 2,500 tonnes.

Offal exports were more positive and grew 10% in volume terms compared to year earlier levels, reaching 8,000 tonnes. Although the Chinese market declined, this was more than compensated by expansion to Hong Kong and the Philippines.

FEED MARKET

Grain markets have been largely bearish over the course of the past month (28 December – 25 January). With little to sustain any market gains, UK feed wheat futures (May-18) fell by £2.85/t, from 28 December, to settle at £138.65/t on 25 January. This was the lowest the contract price since 28 December 2016. Global grain markets have also been largely supressed over the past month. As at25 January, Chicago wheat futures (May-18) were down £5.18/t on the month, at £115.27/t. Meanwhile, Chicago maize (May-18) continued to move closer to the £100.00/t mark, falling by a further £5.04/t over the month to close at £100.46/t on 24 January. The pressure on US maize prices has been driven by the glut of global maize supplies, however, with the weakening dollar, it will be interesting to see if Chicago maize futures (May-18) fall below the £100.00/t level.

One of the main fundamental drivers of movements in grain markets over the past month was the release of the latest USDA World Agriculture Supply and Demand Estimates (WASDE). World wheat production in 2017/18 was forecast up for the sixth consecutive month, an increase of circa 20Mt since the July WASDE. The greater influence on world grain prices comes from changes to stocks figures. World wheat stocks in 2017/18 were forecast 400Kt lower compared with the previous estimates made in December. However, at a record 268Mt, they are forecast 6% up on last year’s level, keeping markets subdued.

In the January WASDE, global maize stocks were forecast a few million tonnes higher than in the December report, at 207Mt, which also pressured prices.

GB animal feed usage statistics, released on 12 January, highlighted record usage of both wheat and barley in compound and IPU feed production for the month of November. In November 2017, 298Kt of wheat was used in the production of animal feed, up 5% on the month (October 2017) and 7% higher year on year. Meanwhile, barley usage in November 2017 was up 20% on the year, at 99Kt. The spread between ex-farm (spot) feed wheat and feed barley between July and November 2017 averaged£18.78/t, compared with £17.59/t for the same period in 2016.

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Oilseed prices have been mixed in January. Paris rapeseed (May-18) futures continue to decline, closing at £300.06/t on 25 January, down £12.63/t from 28 December. Meanwhile, over the same period, Chicago soyabean (May-18) futures declined by £5.76/t, closing at £258.71/t on 25 January. However, in dollar terms, Chicago soyabean (May-18) futures increased by $13.23/t since 28 December, to close at $368.78/t on 25 January. As mentioned above, the dollar has weakened against the euro and pound. .UK delivered rapeseed prices (Erith, spot) have fallen by £18.00/t from 5 January to £295.50/t on 26 January.

Spot UK soyameal prices (Brazilian, 48%, ex-store, Liverpool) were £312/t on 19 January, down £3/t from 15 December, but £8/t on the week. UK rapemeal prices (34%, ex-mill Erith) were £166/t on 12 January, up £1/t from 15 December.

In mid-January, soyabean prices came under pressure following the release of the USDA quarterly stocks report. US soyabean stocks were estimated at a record 85.9Mt as at 1 December 2017, up 9% on the year.

Towards the end of the month, Chicago soyabean futures received support from concerns over South American crops. Brazil’s 2017/18 soyabean harvest has had a slow start (AgRural) due to issues with soil humidity at planting and above average rains in January.  In Argentina, 30% of the 1Mha regularly used for soyabean plantings was yet to be planted as at 18 January (Buenos Aires Grain Exchange) due to dry weather. While there are concerns over the Argentine soyabean crop, it is worth bearing in mind that global soyabean production in 2017/18 is forecast as the second highest on record and global stocks are also at record levels. So there is a cushion to mitigate any shortfall in Argentine soyabean production. 

The average US soyabean protein content has declined by 1.2 percentage points from 35.3% in 2009 to 34.1% in 2017. The protein content of Brazilian soybeans is higher than US soyabeans, making the soyabeans of Brazilian origin more attractive. It is reported that higher yields for US soyabeans are squeezing protein content (Reuters). The falling trend in US soyabean protein levels could become a larger issue for US soyabean exports.

CONSUMPTION

Improved pork sales contributed to shoppers spending £1bn more this Christmas than last year. Volume and value both grew ahead of the market, although the category was still affected by inflation. Growth was driven by shoppers taking 1.75m more trips, with steaks, leg joints and mince driving volume growth, according to data from Kantar Worldpanel.

In the 12 weeks ending 31st December, value and volume sales of fresh and frozen pork grew by 6% and 1% respectively year on year. In the same period, Bacon (+5% in value) and sausages (+6%) both continued to grow, with the Christmas weeks providing a boost. This was driven by people who likely added them as extras to their Christmas dinner or for cooked breakfasts over the festive period. After two years of strong growth, Gammon sales did not increase much in 2017. While the premium tier grew, it was due to purchases of slightly smaller joints.

The producer share of the retail pork price fell slightly during December to 40.4%, a decline of just over half a percentage point compared with the previous month. It is now at the level it was last December.

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This pig meat sector UK market update was prepared by:

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Abigail Schofield, Bethan Wilkins & Duncan Wyatt
AHDB Market Intelligence

Phone: +44 (0)24 7647 8610/8757/8856

e-mail: Abigail.Scofield@ahdb.org.uk,  Bethan.Wilkins@ahdb.org.ukDuncan.Wyatt@ahdb.org.uk  

Twitter: @AHDB_Pork #PorkMarketNews

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