UK Pig Meat Market Update

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The June 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

Pig prices have begun to edge up over the past two months, following the trend expected for the time of year. The EU-spec GB APP averaged 148.62p/kg in April, marginally higher than the previous month but over 10p down on April 2017. In general, the average price started to pick up as the month progressed. Industry reports suggest supplies have been tight, following difficult winter conditions. This is contributing to the uplift in domestic prices, along with improved demand as weather conditions have been good. The uplift continued in early May, with the APP standing at 150.68p/kg in week ended 19 May.

The SPP has followed a similar trend to the APP, although the gap between the two price series has recently narrowed. The April average EU-spec SPP of 145.55p/kg was almost 11p down on a year earlier but virtually on par with March. However, moderate increases in May have taken the SPP to 148.17p/kg for week ended 26 May.

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Carcase weights fell seasonally in April and early May, but generally remained just above year earlier levels. The average weight in the APP sample in April was 83.11kg, 330g heavier than in April 2017. There was a slightly smaller increase in the average carcase weight from the SPP sample, which was only 200g heavier. This pattern has been recorded throughout 2018, and suggests that premium pig weights have been rising further than for standard pigs.

The limited uplift in the finished pig market has also shown some initial signs of influencing weaner prices. While the average price for 7kg weaners in April was actually slightly lower than in March (-81p), at £36.87/head, 30kg weaners were slightly more expensive (+£1.10) at £51.49/head. However, the extent of price falls over the last year meant that the 7kg price was almost £4 lower than in April 2017 and the 30kg price was down by almost £8. In May so far, prices have increased and stood at £38.07 and £52.30 in week ended 26 May.

EU PRICES

In early May, the average price of pigs in the EU fell, continuing the trend seen since mid-March. However, in the past two weeks, prices have started to increase again. In the week ended 27 May, the average price reported to the EU Commission was just over €143/100kg, up €2.34 on the previous week, and just under €0.50 higher than four weeks earlier. Nonetheless, stronger increases in prices in May 2017 mean the gap compared to last year has increased to around €33/100kg. In sterling terms, prices similarly gained 0.5p/kg compared to the level recorded four weeks earlier. However, some weakening of the pound against the euro means the discount compared to year earlier levels is smaller, at 27p/kg.

Prices had been falling as subdued demand, particularly for export, has been limiting purchases from processors. Supplies had also been ample, however in recent weeks this is now reported to be falling. The tightening supply, and the beginning of the holiday season which should improve demand, has enabled prices to begin recovering in recent weeks.

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Germany and the Netherlands recorded the largest price rises among the major producers in May, climbing around €1.50/100kg and €2.00/100kg respectively in the most recent week, compared to four weeks earlier. Prices in Spain and Poland were both up around €0.50/100kg, while quotes in Denmark and France were stable. Prices in all major producers were over €25/100kg lower than the same point a year ago, with Poland recording the largest decline of almost €38/100kg.

The UK made one of the largest price gains in EU over the past four weeks (+€2.71/100kg), to stand at €167.56/100kg in the week ended 27 May. As such, the premium received for pigs in the UK has generally increased over the last month, averaging €25/100kg compared to €21/100kg in the four weeks prior. The gap is now slightly larger than the five-year average, and €14 greater than year earlier levels. Unless the upward momentum in the EU price picks up, the increased price competitiveness of European pork could limit the level of UK pig prices in the coming weeks.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

The latest Defra statistics release includes downward revisions to official UK pig slaughtering numbers from November 2017 onwards. Clean pig slaughterings during 2017 are now estimated at 10.38 million head, a 3% decline on the previous year. Meanwhile pig meat production stood at 897,700 tonnes, a 2% decline on 2016 levels. For the first quarter of 2018, clean pig slaughterings now total 2.6 million head, 3% higher than year earlier levels. Production increased at the same rate, reaching 229,400 tonnes. The downwards revisions have implications for the pork production forecast, meaning the 2018 total is likely to be lower than previously anticipated.

Initial figures for April suggest UK pig supplies were perhaps surprisingly high during the month. Slaughterings were up 17% (+132,800 head) compared with a year earlier, reaching 908,300 head. Some of this increase will be attributable to the earlier Easter this year, meaning there were two extra working days in April 2018. However, even when taking this into account, April slaughterings per working day would still be over 5% higher than year earlier levels, according to the latest statistics release.

Nonetheless, note that the rise was particularly driven by slaughterings in Northern Ireland, which were reportedly up 31% (+40,000 head) on the previous year at 169,000 head. This level of increase is well above that recorded in the DAERA weekly figures, which suggest an annual growth closer to 10% for the month. As such, the increase may be somewhat overstated and subsequent revisions might be expected.At 78,700 tonnes, the latest figures suggest UK pig meat production increased ahead of clean pig slaughterings during the month, growing 18% year-on-year. A rise in average carcase weights, to 83.8kg, supported production levels during the month. This was 900g above year earlier levels. In addition, sow slaughterings were 4% higher than year earlier levels at 18,000 head. However, when taking the earlier Easter this year into account, and comparing on a per working day basis, like-for-like throughputs would actually be 7% lower.

Despite production of pig meat declining during March, reported exports rose by 13% year-on-year. UK reported fresh/frozen pork exports totalled 21,600 tonnes, according to data from HMRC. However, the average per tonne value declined by 12%, to £1,250 meaning that the total value of the exports fell by 1% on-the-year, to £27 million.

The growth in volume was in part driven by a 16% (1,900 tonnes) increase year-on-year to other EU member states. Shipments to the Netherlands and Poland both performed strongly, reaching 1,700 and 1,300 tonnes respectively. Conversely shipments to Ireland and Denmark declined over the same period, by 2% (50 tonnes) and 11% (300 tonnes) respectively. Total exports to Europe may have been supported by the then narrowing between UK and EU pig prices, although into April the gap began to widen again.

Exports to the key international markets largely recorded increases, with fresh/frozen exports to China rising by 4% (150 tonnes) compared to March 2017, to 4,000 tonnes. Exports to the US increased by almost a third (+250 tonnes), while trade to Japan (+90 tonnes) and South Korea (+50 tonnes) recorded modest increases. Shipments to the Philippines declined by 43% (150 tonnes).

Offal exports recorded a modest year-on-year increase (+2%), to 6,600 tonnes during March. Exports to China increased by 6% (150 tonnes), to 2,800 tonnes. Balancing this, exports to Hong Kong declined by 13% (150 tonnes), to 1,000 tonnes). While fresh/frozen exports to the Philippines may have declined, offal exports recorded a sharp increase year-on-year (+273%), to 850 tonnes. The unit value of offal followed the same trend recorded in fresh/frozen pork, falling to £912 per tonne, which meant the total value of offal exports was down by 6%, to £6 million.

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According to HMRC, the UK imported 17% less fresh/frozen pork than last year during March. Recorded shipments fell from the three largest supplier: Denmark (-37%), Germany (-1%) and the Netherlands (-6%). Doubts persist over the accuracy of the data, especially relating to the Danish import figure, due to strong production during the first quarter in Denmark making the sharp decline surprising. The total value of UK reported imports of fresh/frozen pork declined by 17% on year earlier levels, as the average value per tonne remained steady.

Imports of bacon declined by 24% on-the-year, to 16,200 tonnes in March, which is less surprising considering the long term trend towards processing more bacon within the UK. Although, imports from Denmark and Germany were reported to have declined by 36% and 50% respectively which may be somewhat overstated.

FEED MARKET

  • Weather has continued to be the main driver in grain markets over the last month. New crop UK feed wheat futures have surged off the back of crop concerns to a new contract high, closing at £158.25/t on Friday 25 May.
  • The drought in the key growing wheat regions in the US has continued into this month. The situation is unlikely to change in the short term; data from the US National Oceanic and Atmospheric Administration is suggesting that rainfall is unlikely in the next two weeks (until start of June). As a result, US wheat futures have risen in value due to the added concerns for the already stressed crop.
  • The outlook for rainfall for the crop growing regions of Western Australia has increased the chance of a drier than average during May to July, according to the Australian Bureau of Meteorology. The region produces almost half the country’s wheat crop and, over March and April, received just 27 per cent of its average rainfall. The lack of moisture has caused issues with winter wheat and barley planting and added stress to the emerging crops, which could pose a risk to yields. This has also contributed upwards pressure on prices.
  • Following the delays to spring planting across of much of Europe, crop conditions have improved for the majority of soft wheat and winter barley crops, according to Strategies Grains. Crop yield potential is now looking more promising in Spain, France and Italy, helping to weaken European prices.

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  • Overall EU rapeseed yields are now pegged at 3.19t/ha, 0.09t/ha below the five-year average, according to the latest MARS crop bulletin from the EU commission. Adverse weather has hampered the development of the crop in several of the key producing countries, including Germany, Poland and to some extent France. New crop Paris rapeseed futures (Nov-18) have rallied off the back of the concerns, to close at €363.75/t on 22 May, the highest price since November 2017.
  • The forecast for the 2017/18 Argentinian soyabean crop has been revised downwards to 36Mt, 2Mt lower than last month’s forecast, according to the Buenos Aires Grain Exchange. The combination of drought early in the year followed by rainfall during harvest has devastated the crop, with 1.2Mha estimated to have been lost. Currently, 46% of the late soyabean crop has been harvested, with 90% of the remaining crop rated as poor/very poor.
  • The US and China agreed to suspend the implementation of tariffs that were due to come into force later this month. It was announced on 20 May that the list of goods with prospective tariff increases, which includes soyabeans, has been put on hold while a deal is negotiated between the two parties.

CONSUMPTION

During the 12 weeks ending 22 April, the volume of fresh/frozen pork sold at retail level declined by 5% on-the-year, according to retail data from Kantar Worldpanel. Shelf prices may well have influenced this decline as the average price per kilogram increased by 4% year-on-year; the combined effect was total spend in the sector remained steady. However, perhaps more positive for the category was that although market penetration (the percentage of shoppers purchasing fresh/frozen pork on at least one occasion) declined by just one percentage point this meant some shoppers purchased less instead of leaving the category.

Perhaps unsurprisingly the cuts which recorded the largest increases in price (belly, loin roasting and shoulder roasting joints) also recorded the largest reduction in volume sold. Equally, leg roasting joints which recorded a 12% decrease in price, recorded 18% growth in volumes sold.

The performance of processed pork followed a different trend during the 12-week period ending 22 April, with volume of sausages sold increasing by 1% despite a 3% rise in average retail price which may perhaps have been driven by the short spell of barbequing weather.

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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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