UK Pig Meat Market Update

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The August 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.

August 2018

UK PRICES

GB finished pig prices continued to increase modestly in June. The monthly average EU-spec APP was just under 2p higher than the previous month at 152.82p/kg. With larger price uplift at this time last year, the gap between this year’s price and last year’s widened to almost 13p.

The market remains largely balanced, with some tightening of supplies supporting the modest price increase. However, with supplies expected to pick up in the coming months, and demand remaining lacklustre, there are risks of the market changing direction. The APP has moved very little in the first two weeks of July, standing at 153.12p/kg in week ended 14 July.

The average SPP also increased by just under two pence in June, to 149.94p/kg. Prices for standard pigs have fallen slightly less than average over the past year, with the year-on-year drop just over 12p. The price changed little at the start of July, standing at 150.34p/g in the week ended 21 July, meaning the annual fall increased to 14p.

As average farmgate prices creeped up slightly in June, while average retail prices slipped, the producer share of the pork retail price increased by just under one percentage point month-on-month, to 39.6%, according to AHDB estimates.

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Carcase weights were unseasonably stable in June, with the average weight in the APP sample remaining virtually unchanged compared to the previous month, at 82.23kg. However, the SPP sample did record a seasonal drop of around 200g. This meant weights remained above year earlier levels, particularly for non-standard pigs. However, very hot weather more recently seems to have slowed growth rates, meaning that weights in July have since dropped back below levels from 2017.

Despite relative stability in the finished pig market, the weaner market has been more mixed. Average prices for 30kg weaners in June were over £4 higher than in May, more than compensating for the downward movement in the previous month. In contrast, 7kg weaner prices were only around 30p higher month-on-month, but this continues an upward trend that began in May. Nonetheless, both series remain down year-on-year. The 7kg average of £37.91/head was over £6 below June 2017, while the 30kg price was just under £6 lower at £54.31/head.

EU PRICES

In early July, the average price of pigs traded in the EU remained stable, following some modest volatility earlier in the year. The EU average pig reference price has therefore been around the €145/100kg level since early June.

In the week ended 22 July, the average price reported to the EU Commission was €145.10/100kg, €0.76 lower than the previous week, and €0.40 lower than four weeks earlier. Increasing prices in 2017 mean the discount compared to last year has widened, and is now around €25/100kg.

In sterling terms however, some weakening of the pound meant prices gained over 1.60p/kg compared to the level recorded four weeks earlier. The discount compared to year earlier levels is therefore smaller, at around 22p/kg. With UK prices only rising 0.9p/kg over the past four weeks (a decline of €1.62/100kg in euro terms), the gap between UK and EU average prices has narrowed slightly. Nonetheless, at around 20p/kg in the latest week, it remains larger than the long-term average.

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While there was broad stability in the average price for the region as a whole, individual markets put in very different performances, perhaps necessary to balance supply and demand across the bloc. Despite strong production growth earlier in the year, Spanish prices have been rising more recently. This may be related to some tightening of supply following the current hot weather conditions, alongside peak tourist season. Trade has also been underpinned by a good export performance, particularly to Japan and South Korea.

Prices in China have been low this year and the EU has felt that particularly in the value of its exports. The lower export value has also limited prices at farmgate level. The EU is yet to materially reap any benefits from the US-China trade dispute, and it remains to be seen how this will develop in the coming months.

UK SLAUGHTERINGS AND PIG MEAT SUPPLIES

Reflecting reports of tight supplies, pork production dipped modestly in June. Output for the month is pegged at 71,800 tonnes, down 1% compared with a year earlier, according to latest figures from Defra.

The small decline in output is likely influenced by the additional week day in June 2017, and on a like-for-like basis, production would still have been higher. Nonetheless, supplies in recent months have been tighter than earlier in the year. Production was less than 1% above year earlier levels across May-June, compared to a 6% growth in the first four months of the year.

The modest decline in absolute production during June was driven by a 2% drop in clean pig slaughterings, which totalled 831,700 head. England and Wales recorded the largest decrease (-3%, -22,000 head), while throughputs in both Scotland and Northern Ireland were actually up slightly when compared with June 2017, by 9% (+2,000 head) and 2% respectively (+3,000 head).

Clean pig carcase weights averaged 82.6kg during June. This was slightly higher than the previous month and 800g up on a year earlier, somewhat mitigating the impact of lower throughputs.

Sow slaughterings were also 3% lower year-on-year at 20,900 head, which will have contributed to the drop in output. This is the first time monthly sow slaughterings have fallen on the year in 2018. The change in trend may simply reflect the return to more normal culling levels from mid-2017, having been low at the start of the year, as well as the influence of an additional working day in June 2017. However, this is still the lowest monthly sow throughput since December.

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HMRC reported UK imports of fresh/frozen pork declined 12% year-on-year during May, to 35,600 tonnes. Meanwhile, reported exports dropped by 17% on the year, to 15,800 tonnes.

A decline in exports was recorded to all the major destinations, with shipments to China being recorded at 18% (-600 tonnes) below year earlier levels. On top of this, shipments to Hong Kong declined by a similar volume, to less than half the amount of a year ago. This reflects the lower import demand on the Chinese market so far this year.

Exports to other EU countries also declined 18% (-2,200 tonnes) compared to May 2017, to 9,800 tonnes. Shipments to Denmark particularly took a hit, with volumes halving on the year at 1,400 tonnes. Trade with Italy was exceptionally strong in May 2017, and this year the reported figure for May was more in-line with the long term trend at 100 tonnes, which is 20% of the year earlier volume.

Nonetheless, pockets of export growth remained in May. Shipments to the US increased by 34% (+300 tonnes) on the year, to 1,200 tonnes. Exports to Poland also returned to almost 400 tonnes during the month, having been negligible last year.

The reported total value of UK pork exports during May stood at £22.5 million, 15% below year earlier levels. The US was the only major market to record an increase in value, growing by 24% year-on-year, to £3.7 million.

In contrast to fresh/frozen pork, HMRC reported export volume of offal increased strongly during May, up by 12% on year earlier levels, to 7,500 tonnes. Shipments to China, the largest destination for UK offal exports, increased by 20%, to 3,400 tonnes. This may reflect reduced competition from the US, with China imposing an additional 25% tariff on US pig meat products from April. However, a sharp decline in average export prices meant the value of UK offal exports still slipped by 1% on the year, to £6.5 million.

Looking at imports, according to HMRC, UK fresh/frozen pork imports declined 12% during May to 35,600 tonnes. There were declines in shipments from all the major destinations; in particular imports from both Germany and the Netherlands declined by 22%, to 6,200 and 3,900 tonnes respectively. Shipments from Denmark, which supplies around a third of UK imports, decreased by 3%, to 11,800 tonnes. There have been doubts surrounding the accuracy of this data for a number of months, however recently the trends seem to have become more reliable. Click here to read about UK pork imports based upon key suppliers’ data.

FEED MARKET

Weather continues to be the driving force in grain and oilseed markets this month, both internationally and domestically. In light of current conditions, the AHDB has launched a drought hub to give guidance on how to mitigate the risks of heat stress and drought. Click here for more information…

Grains  

  • EU-28 average wheat yields have been forecast 2.4% below the five-year average, at 5.59t/ha according to the July crop monitoring report from the EU Commission. The most adversely affected EU wheat yields are countries in the Baltics and across northern and northern central Europe. The increasing crop concerns drove UK wheat futures (Nov-18) past the £180.00/t mark on the 24 July, the first time since May 2013. As at 26 July, UK wheat futures (Nov-18) was at £184.50/t.
  • On July 12, the USDA slashed its forecast of world wheat supplies and stocks in 2018/19 by 5.3Mt to 260.9Mt in its latest World Agricultural Supply and Demand Estimates (WASDE). The decline has been driven by challenging weather in a number of key exporting countries, including Russia, Australia, the Ukraine and the EU.
  • The GB wheat area is estimated at 1.74Mha, a decrease of 2% from 2017 levels, according to AHDB’s 2018 Planting and Variety Survey. The current dry conditions and lower domestic stocks suggest that the 2018/19 domestic supply may be tight once again.
  • The GB winter barley area is estimated down 7% on 2017, at 365Kha. Meanwhile, spring barley is estimated at 768Kha, an increase of 4% from 2017 levels.

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Proteins

  • Soyabean prices came under significant pressure between late May to mid-July, due to various factors. On the 6 July, the US and China imposed reciprocal tariffs on goods. This includes a 25% tariff on US soyabeans.

  • World soyabean stocks in 2018/19 are now forecast to reach a record high of 98.27Mt, according USDA’s July WASDE report. The rise comes from increased stocks projected for the US, Argentina and Brazil. The revised forecast contributed to a fall in Chicago soyabean (Nov-18) futures to close at $306.50/t on 13 July, the lowest price for the contract.

  • The oilseed rape area in England and Scotland is estimated to be up 9% on 2017 levels, at 608Kha, according to the AHDB’s Planting and Variety Survey. This is the first OSR area increase for 7 years.

  • On July 12, the Association of German Farm Cooperatives cut its winter rapeseed production forecast by 0.5Mt to 3.55 Mt, a 17% decline from 2017 levels. The reduction follows ongoing dry, hot weather.

  • Dry weather in key US growing regions has resulted in raised concerns for some soyabean crops. The crops are reaching their critical growth stages, meaning they are particularly sensitive to heat and moisture stress. 70% of soyabean crops were rated as good/excellent in the w/e 22 July, compared with 57% compared to this time last year.

CONSUMPTION

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The latest data from Kantar Worldpanel, covering the 12 weeks to 17 June, recorded a stable performance for the total pig meat* category. Rising prices meant that in value terms the market grew by just over 1%, to an estimated £994 million.

Volume sales of both bacon and sausages were up compared to a year earlier, increasing by 1% and 2% respectively. Sales of sausages in particular have likely continued to be boosted by the warm weather and increase in barbecue occasions. While growth in sausage sales volume has not matched that for burgers (+10% year-on-year), 1.5 million more trips were recorded for the category overall. Growth in the value of the sausage market also outpaced the increase in volume, climbing 3.5% on year earlier levels to an estimated value of £159 million.

Sales of pork sliced cooked meats were fairly stable in volume terms, but value increased by around 1.5% due to higher average prices.

Primary pork, however, recorded a decline in sales across the same period, in both volume and value terms. A 4% drop in sales volumes counteracted rising retail prices, meaning that market value was still down 0.5% year-on-year. Sales of roasting joints were particularly negative; leg roast sales were down 13% by volume, despite falling prices, meaning the value of the market was 16% lower. Loin roasting joints also recorded a 12% decline in market value, as a sharp rise in average prices (+38%) translated into sales volumes declining by more than a third.

With the heatwave continuing, the switch away from the primary pork products towards processed might be sustained in the coming weeks. At the moment, this seems to be balancing pig meat sales overall, but whether this will continue is uncertain.

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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