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 2018

UK PRICES

Having increased in June and July, GB pig prices eased back in August, with the EU-spec APP averaging 152.30p/kg, 0.8p down on the previous month. The monthly price was almost 16p lower than in the same month last year. Prices continued to fall in early September, with the APP for week ended 22 September standing at 150.93p/kg.

Some easing of prices is typical at this time of year, reflecting reduced demand during the school holidays. Nevertheless, the market has remained well-balanced overall, with a spread of little more than a penny in prices over the past three months. Supplies have remained above year earlier levels, both in the UK and on the continent, while both domestic and export demand have been broadly stable. However, the exchange rate remains favourable, which has likely helped keep prices at reasonable levels.

The EU-spec SPP followed a similar trend, falling by 1.43p between July and August to 148.84p/kg. The gap between the two series increased to 3.36p, although this is still a little smaller than a year ago. September recorded further price falls, with the SPP averaging 147.68p/kg during the month.

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The weaner market has also begun to decline, with prices remaining well below year earlier levels. The monthly average prices for both 7kg and 30kg pigs fell by around £1.50 in August, bringing prices to the lowest level since May. At £37.71/head, 7kg weaners sold for around £7 less than in August 2017, and the annual decline was similar for the 30kg average, standing at £53.30/head. As well as the declining finished market, high feed and straw prices have been a factor contributing to falling weaner prices recently.

The average carcase weight in the APP sample for August was virtually unchanged compared to July, at 82.44kg, but this was around half a kilo lighter than in the same month last year. This is the first time that the monthly average weight has not increased year-on-year since February 2017. Although, carcase weights were unusually high between August and October last year, reflecting some delays to marketings at this time. Weights have remained below year earlier levels into September, suggesting fewer pigs are being rolled than last autumn. This may indicate more closely aligned supply and demand than last year, and reports indicate fewer plant breakdowns. Into September, weights increased in line with the unusual seasonal pattern. The rate of increase has been similar for the APP and SPP samples, suggesting similar increases in carcase weights for premium and standard pigs.

EU PRICES

The EU average pig price declined over the past four weeks. At €141.87/100kg, the latest price for week ended 30 September stands €10.41 below four weeks ago, and the discount on 2017 prices stands at €16.13/100kg.

In Germany, the price declined by €15.02 over the four week period, to €144.70/100kg in the latest week. Poland and the Netherlands also recorded decreases of over €10, to €139.20/100kg and €126.38/100kg respectively. Meanwhile, Spain, France and Denmark recorded more modest declines overall. Following the recent outbreak of African Swine Fever in Belgian wild boar, pig prices in Belgium have fallen by over €25 over the past four weeks to stand at €106.20/100kg, the lowest figure since March 2016. Reports indicate the slaughter of Belgian pigs in the Netherlands and Germany has at least partly ceased, which may make now it difficult to market all the available Belgian slaughter pigs.

In the UK prices have remained broadly stable in both sterling and euro terms. In the week ended 30 September, the UK price had slipped 1.16p compared to four weeks ago, to 146.29p/kg. In euro terms, the price is €164.16/100kg, a small increase of around half a euro reflecting some modest strengthening of the pound. Overall, this does mean the premium received by British producers has increased to around €22/100kg in the latest week.

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Reports suggest supplies are picking in in Europe, with rising numbers of slaughter pigs and increasing carcase weights. Without a concurrent increase in pig meat demand, prices have begun to fall. The proximity of the ASF outbreak to other key EU pig producers is also a concern, and neighbouring processors are reportedly reluctant to build up stocks in case of further spread. As such, demand for frozen pork may decline, which could further affect EU pig prices.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

The UK produced 81,800 tonnes of pig meat in August, with 947,000 clean pigs slaughtered according to data published by Defra. Production in the month was 4.5% higher (3,500 tonnes) than in August 2017. Following a challenging July, where CO2 shortages limited slaughtering, last month clean pig throughputs across the UK were higher by 7% overall (63,400 head), and 14% in Scotland. UK sow slaughter was 15% higher (3,000 head) than in July. Carcase weights picked up slightly to 82.8kgs for clean pigs in August, although sow weights fell slightly.

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This brings total production for the year so far to 614,500 tonnes, which is a 4.7% increase (27,700 tonnes) compared with the same period last year. Clean pigs continue to be plentiful; year to date slaughter is now over 7 million head, 273,000 more than at the same point in 2017.

Although prices have been relatively stable throughout the summer, they are now showing signs of softening. With limited domestic demand growth and a small fall in exports, it may now be that as production growth has picked up again after slowing in June and July; the additional supplies are coming to bear on the market.

During July, exports of fresh/frozen pork fell by 10% when compared to a year earlier, to total 16,400 tonnes, with a decline in value of 9%, to £22.3 million. Exports to China are down 17% (-575 tonnes) in July 2018 compared to the previous year. Trade with Denmark is also notably lower in July, down 40% (-1,200 tonnes) to total 1,800 tonnes. However, exports to some countries have shown positive changes in trade. Deliveries to the high value US market increased 82% in July to total 950 tonnes. Meanwhile, shipments to Sweden also recorded strong growth, totalling 800 tonnes; this is a 146% (+477 tonnes) increase on the year.

In contrast to the fresh/frozen pork trade, data from HMRC reports that offal exports rose by 11% in July compared with the year earlier, totalling 7,000 tonnes. China, the largest market for UK offal exports, commanding a 48% share of UK offal exports, increased shipments during July, up 32% to total 3,340 tonnes. Chinese tariffs on US pig meat products, along with the strengthening of the US dollar against the Yuan in recent months, is likely to have reduced the competitiveness of US products in Chinese markets. Overall, the value of offal to China totalled £3 million, a 48% rise compared to July 2017.

During July, HMRC reported imports of fresh/frozen pork to be up by 5% (+1,800 tonnes) on the year, totalling 38,800 tonnes. Shipments from Germany and Spain both increased significantly, by 47% (+3,000 tonnes) and 27% (+800 tonnes) respectively. Shipments from Denmark, the largest exporter of pork into the UK, decreased by 10% (-1,300 tonnes) during July to total 12,000 tonnes. Average import prices fell by 13% on year earlier levels in the month to £1.83/kg; this resulted in the value of imports falling by 8% to total £71 million.

FEED MARKET

Grains  

  • While the start of the month saw speculation over Russian export curbs supporting prices, this faded as the month drew on. Despite downward revisions to Australian wheat production mid-month, news of a record US maize yield forecast pushed prices lower. However, by the end of the month, concern over frost damage to Australian crops and the potential for lower Russian exports did lend some support to prices and stemmed the declines.
  • At an EU-28 wide level, grain maize yields are now forecast to be down 5% year on year by the EU Commission due to further confirmation of the impact of dry weather this summer (read more here). This is 1% down from the August MARS report and could reduce feed grain supplies within the bloc.
  • On the domestic front, news came from Vivergo at the beginning of September announcing the cessation of bioethanol production at the end of the month. Prices initially fell in response, although the true impact will be borne out in the course of time.
  • GB compound animal feed production (including integrated poultry units) was 5% higher in July than year earlier levels, at 1.09Mt, according to the latest cereal usage data published this month by AHDB. Furthermore, this is the highest level for the month of July since records began in 1995/1996 (read more here).
  • New analysis by AHDB suggests that a decline in bioethanol demand does not alone appear to drastically change the UK wheat supply & demand outlook for 2018/19, when looking at historical usage with wheat production and consumption scenarios. Meanwhile, the number of poultry chicks and poults placed in the UK continues to break records (read more here), which is supportive for grain demand from the sector.

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Proteins

  • At the beginning of the month, much of the market was driven by currency fluctuations. Expectations for increased US soyabean production and stocks were offset by concerns over lower global rapeseed supplies.
  • As the month progressed, forecast record US soyabean yields and the ongoing US-China trade dispute lead to falling prices, although higher than expected export data lent some support to Chicago soyabean futures (Nov-18) at the end of the period.
  • Expectations for the 2018 US soyabean crop were raised by INT-FC Stone this month, from 124.5Mt to 130.1Mt. The risk management firm’s latest forecast is some 5.2Mt above the August forecast from the USDA and nearly 11Mt above 2017 levels. If confirmed, this would add to potential global soyabean supplies in 2018/19 and this weighed on US soyabean prices over the period.
  • Trade tensions continued to escalate as the US imposed tariffs on a further $200 billion of Chinese goods. China responded by placing tariffs on an additional $60 billion worth of US goods. In addition, according to a report by the Wall Street Journal, China has cancelled trade talks with the US for the time being. As such, at least in the short-term, US soyabean prices will remain pressured by Chinese tariffs though the longer term impact of this remains to be seen.
  • Canadian canola (rapeseed) production was pegged 10% lower than 2017 at 19.2Mt this month by Statistics Canada. This follows a hot, dry summer in the key growing provinces and is the first official estimate since harvest started. Last month, the International Grains Council (IGC) pegged the crop at 20.5Mt but still expected global rapeseed demand to exceed production in 2018/19. If confirmed, a smaller Canadian crop could further tighten global rapeseed supplies, which is likely to further reduce the influence of soyabean prices on rapeseed prices in future.
  • EU-28 rapeseed production was reduced again by both the EU Commission and private analysts Strategie Grains due to the adverse weather in the growing season. The Commission cut its forecast by 0.5Mt compared to those made in late-July to 19.2Mt, now over 12% lower than 2017/18. Meanwhile, Strategie Grains cut its estimate of the 2018 crop from 20.0Mt to 19.6Mt. This further tightens EU supplies and is forecast to increase the EU’s oilseed import requirements in 2018/19.
  • Year to date EU soyabean imports (1 July - 20 September) stand at 2.8Mt, an 11% increase from the same period last season (EU Commission). US exports to the EU have drastically increased reaching 52% of total EU imports, compared to 25% in the same period in 2017. This season has seen US soyabean exports become increasingly price competitive compared to other origins, as a shift in Chinese demand has pressured US prices while supporting prices from alternative suppliers in South America.

CONSUMPTION

During the 12 weeks ending 12 August, meat retail sales continued to follow trends set out in the past two updates, according to data from Kantar Worldpanel. With much of the country continuing to have experience warm, dry weather, BBQs will have remained popular. Reflecting this, sales of pork items for a BBQ were promising, with the volume of pork ribs sold up by 3% and marinades recording a rise of 17%. Pork sausages also recorded a 3% rise in sales volumes, with Kantar reporting the category has recruited 420,000 shoppers and featured in 2.2 million more trips. An increase in volumes on promotion (+18% year-on-year) and strong growth from older shoppers has reportedly fuelled this change.

In the period, sales of fresh/frozen pork continued to struggle, recording a 3% year-on-year decline in volume. This is particularly disappointing considering there was a 1% decline in average price, as sales on promotion were up year-on-year in volume terms. Within this category, sales of roasting joints were particularly uninspiring, especially for loin roasting joints which decreased in volume by 46%. Nonetheless, of the red meats, pork recorded the strongest performance with total pig meat* sales volumes recording a small (+0.4%) increase year-on-year.

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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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