UK Pig Meat Market Update

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The September 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.

September 2017

UK PRICES

GB pig prices increased further throughout July, with the monthly average EU-spec APP adding 2.3p compared to the previous month, to reach 167.90p/kg. This was the fifth consecutive month with increasing prices, with the monthly average over 37p above year earlier levels. The tight supply situation continued throughout the month, which helped support prices. However, subsequently the APP dropped back somewhat in the first week of August, before stabilising at around 168p/kg.

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The SPP also continued an upward trend during July, increasing by over 2p month-on-month to average at 164.36p/kg. The gap between the APP and the SPP increased slightly throughout the month, starting at 3.58p and ending at 3.71p. However, moving into August the gap has declined again as the APP fell more sharply than the SPP. The latest SPP, for week ended 26 August, stood at 164.17p/kg which is almost 27p higher than a year earlier.

The average carcase weight rose during July, slightly earlier than the usual seasonal uplift in carcase weights. The APP averaged 82.09kg during the month, which was 0.17kg higher than June 2017. Weights have continued to increase moving into August, with the latest figure for week ended 19 August standing at 82.79kg, 1.75kg heavier than year earlier levels.

The GB weaner market followed the same trend as the finished pig market, with increases recorded for both categories of weaner during July. 30kg weaners increased by 46p on the previous month, to stand at £60.52/head, while 7kg weaners recorded an even more modest increase of 22p, to £44.26/head. Weekly prices have fluctuated somewhat moving into August, but remain strong and over £10/head higher than year earlier levels for both categories.

EU PRICES

Following some sharp declines throughout July, EU pig prices began to stabilise moving into August. The EU average pig reference price was broadly stable overall in the four weeks ended 27 August, with an increase pf €1.55/100kg in week ended 20 August being largely counteracted by small declines in the other three weeks. This left the average EU pig price at €170.56/100kg in week ended 27 August, which is €6.49/100kg below the peak just eight weeks prior, but remains over €7 above year earlier levels.

The minimal price movements over the past month suggest that supplies of live pigs have largely been in balance with demand. Nonetheless, demand for pig meat is still reported to be struggling, and the imminent end of the holiday season could emphasise this in some regions. In addition, EU pork exports to the Asian markets remain well behind year earlier levels. If demand for pork remains subdued over the coming months and supply continues to recover somewhat, the scope for further price increases may be limited.

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On an individual country basis, pig prices in Spain, Germany and the Netherlands were virtually unchanged in the four weeks ending 27 August.  In Denmark, the reference price had been relatively stable until the most recent week, when it dropped €1.64/100kg. In France, prices fell even more strongly by €4/100kg overall. The overall stability in the EU average price over the past four-week period was also enabled by a sharp rise in the published Italian reference price (+€38/100kg) in week ended 20 August.

In euro terms, the UK reference price declined sharply the four weeks ending 27 August, posting a decline of just over €5/100kg, to stand at €178.55/100kg at the end of the period. However, further weakening of the pound against the euro over the past month had been broadly supporting the UK reference price in sterling terms until the most recent week, when prices fell 0.55p/kg. As such, the gap between the EU and UK reference price had been opening up again, but returned below the €10 mark in the week ending 20 August.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

UK clean pig slaughterings fell by 4% on the year in July to 828.5 thousand head, according to latest data from Defra. This takes year to date (January – July) throughputs up to 5.9 million head, 6% lower than the same period last year.

Sow slaughterings declined on the year for the seventh consecutive month in July. At 17.8 thousand head, the latest sow throughputs are 4% lower than July 2016 and take year to date slaughterings to 134.5 thousand head, 14% lower than the same period last year.

The fall in clean pig slaughterings during July reflects the sentiment that domestic pig meat supplies have been tight since the start of the year, driven by an assumed contraction in the domestic breeding herd. However, the continued slowdown in sow slaughterings supports reports that producers are no longer rationalising their herds, with pig prices recovering considerably from the multi-year lows in spring 2016.

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The fall in the number of pigs slaughtered during July, outweighed the slight rise in average weights, resulting in pig meat production falling by 3% on year to 70.5 thousand tonnes. This takes year to date pig meat production up to 507.4 thousand tonnes, 6% down on the same period in 2016.

Following year-on-year growth during the previous month, UK pork exports faltered during June. Fresh/frozen pork shipments during the month were down 5% on a year earlier at 17.5 thousand tonnes.

Limited availability of exportable supplies likely continued to impact exports, with UK pig meat production during the month down 2% on June 2016. Growth in pork exports has also been deterred by slower demand from China, with shipments 15% lower than in June 2016 (read more about Chinese demand here). Meanwhile, trade with the EU showed a smaller decline of 2% on the year in June. Falling shipments to Ireland and Denmark were partially countered by increases in exports to the Netherlands and Germany. 

Nonetheless, a rise in the average unit price meant that the value of UK pork exports was still 11% higher than in June 2016, at £24.5 million. A decline in the value of shipments to China and fewer high value cuts going to the US led to the EU’s share of the UK pork export market value returning to 70%. It had previously dropped to nearer 60% in 2016.

Offal shipments during June were also 4% lower year-on-year, totalling 5.7 thousand tonnes. A 30% decline in shipments to China, the UK’s primary export destination, drove the overall decline. However, the impact of this was lessened by significant increases in shipments to both Hong Kong (+64%) and the Philippines (+112%).

Conversely, exports of other pig meat products such as bacon, sausages and processed grew strongly during June, compared to both the previous month and June 2016. However, there are some doubts surrounding these figures, given that the increases were driven by unusually large shipments to Denmark and the Netherlands during the month.

Imports of fresh/frozen pork showed the first year-on-year decline since March 2016 during June, falling by 2% to 40.1 thousand tonnes. This was driven by a 21% decline in imports from Denmark, perhaps suggesting these figures could be moving closer in line with reality. However, notable growth continued from other key suppliers. Market intelligence suggests pig meat imports, especially from Denmark, may have been overstated for around a year. Read more about this in the latest outlook review.

FEED MARKET

Over the past month, global grain markets have been weighed on by a combination of factors including Northern Hemisphere harvest pressure and improved US weather conditions, amidst a backdrop of ample global supply. These developments on the global stage has had a bearing on UK markets. From 25 July to 25 August, Nov-17 UK feed wheat futures lost 4% to settle at just under £140/t on 25 August.

In its latest World Agricultural Supply and Demand Estimates (WASDE), the USDA sharply increased its forecast of global wheat supplies for this season. This was driven by increased expectations of Black Sea wheat output, outweighing downgrades to US spring wheat output.

From a more domestic perspective, by the 22 August 68% of the GB cereal and oilseed area was estimated to have been harvested. According to the latest AHDB harvest report, this is ahead of the five year average of 59% for this point in August. In terms of yields and quality for specific crops, out of the 65% of the winter wheat area harvested, it is estimated that yields are between 8 and 8.2t/ha, while specific weights are expected to be between 73-74kg/hl. For winter barley, 100% of the GB area is estimated to have been cut with the GB average yield forecast at 7-7.2t/ha (five-year average 6.8t/ha).

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Over the course of the last month, global oilseed markets have diverged somewhat. While soyabean markets have been weighed down by ample global supplies, rapeseed prices have remained firm, driven by uncertainties surrounding world availability. 

In the latest WASDE, published on Thursday 10 August, the USDA forecast US soyabean production at 119.23Mt. This is 1.7% above last season’s record and 3.29Mt above the previous forecast in July. The increase is due to the unanticipated upward revision of the US soyabean yield forecast which is now pegged at 3.32t/ha, up 0.9t/ha on the trend yield used for previous forecasts.

Between 25 July and 25 August Nov-17 Chicago soyabean futures lost 5%, to settle at $347/t. Furthermore, Brazilian soyameal prices (48% ex-store Liverpool) for spot delivery has fallen by £5/t since 21 July to £295/t on 25 August. On the other hand, Nov-17 Paris rapeseed futures gained 2% over the same time frame, closing at €370.50/t on 25 August.  UK delivered rapeseed prices (Erith, November delivery) as at 25 August were £340.50/t, up £10.50/t from 21 July, helped by the weakening of the pound against the euro, as well as support from soya oil markets.

CONSUMPTION

In the 12 weeks ended 16 July, primary pork volume sales have fallen by 5.3% year-on-year. There has been an increase in primary pork prices by 8%. Combined, this means that spend of the last 12 weeks has seen a year-on-year increase of 2%.

Roasting joints have also seen a sharp decline year-on-year, according to the latest data from Kantar Worldpanel. Continuing the trend of recent months, there has been a drop in retailer promotional activity which may have contributed to the decline in sales although the impact of price inflation cannot be discounted.  The largest decline in roasting joints was seen in the shoulder roasting joints with a drop in volume of 22.6% compared to the same period last year. In contrast the price has risen by 8% year-on-year. For shoulder roasting joints this means overall spend is down by 16%.

Bacon, which has been showing small increases recently appears to be more stable now looking at data for the 12 weeks ended 16 July. Volumes of bacon were down by 1% year-on-year and prices were up by 2% over the same period. Therefore, total spend increased by 1% year-on-year. Pork pies showed some growth in the 12 weeks. Volumes increased by 8% year-on-year alongside a price increase of 3%, meaning total spend of pork pies also increased by 11% year-on-year.

The picture for other meats was mixed. Total spend on beef over the 12-week period fell by 2% with roasting joints falling by 13% year on year. Total beef sales volumes fell by 5.2%. Primary poultry sales increased by 1.8% over the 12 weeks year-on-year and total spend on poultry was up by 1.5% over the same period.

At 44% the producer’s share of the retail pork price recorded a marginal gain (0.2 percentage points) on the month in July and is the largest proportion received by producers since records began in 2009. The current share is nine percentage points higher than July 2016. The average farmgate price continued to increase in July, rising by 1% on the month and was 28% higher than the same period a year earlier. At the same time, the average retail price increased by 1% both month on month and year on year.

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This pig meat sector UK market update was prepared by:

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Bethan Wilkins, Millie Askew & Duncan Wyatt
AHDB Market Intelligence

Phone: +44 (0)24 7647 8757/8968/8856

e-mail: Bethan.Wilkins@ahdb.org.uk, Millie.Askew@ahdb.org.ukDuncan.Wyatt@ahdb.org.uk  

Twitter: @AHDB_Pork #PorkMarketNews

The United Kingdom pig meat situation and outlook is analysed in more detail in "Pig Market Trends", published monthly. For further information, click here.

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