United Kingdom Pig Meat Market Update. April 2018 UK PRICES

Transcription

1 United Kingdom Pig Meat Market Update April 2018 UK PRICES During February, the EU-spec SPP averaged p/kg, 2.05p down on the previous month and making this the seventh consecutive month of decline. The SPP for January last year was 2.78p/kg higher, meaning the gap relative to year earlier levels had widened again to 3.92p/kg. Moving into February, the SPP has continued to follow a downward trend, standing at p/kg for week ended 24 March. The EU-spec APP in February followed a similar trend, falling 2.06p/kg on the month to average p/kg. The price differential between the APP and the SPP was stable in February at 3.06p/kg. After increasing into January, the average carcase weight for the APP sample fell again by 840g between January and February. At 83.41kg, the average was 930g lower than for the SPP sample. Finally working through the stocks of pigs that had been held back for processing after Christmas likely contributed to the fall. Average probe measurements continue to be in line with the 6-month average. Weaner prices moved downward overall again in February. 7kg weaners averaged 36.86/head during the month, 69p less than in the previous month, and 1.63 below February They have since recovered slightly in March, to in the week ending 24 March. The price of 30kg weaners lost 1.53/head, averaging in February. This was 4.60 less than year earlier levels, and may

2 indicate uncertainty over the finished pig price in the coming months, falling further into this month to in the week ending 24 March. EU PRICES The EU average pig reference price has recorded some significant upwards movement over the past month. For week ended 18 March, the average price reported by the EU Commission reached /100kg, perhaps starting to show signs of softness having but still up 12 compared to eight weeks previously. The strong upward momentum can be attributed to a tight supply situation, particularly in Germany. However, this may only be a short-term situation, with the EU breeding and finishing herds increasing according to the December census results. In addition, reports suggest the rise in pig prices has not been fully reflected in demand for meat at wholesale and retail level, which may ultimately limit the extent to which farmgate prices can rise. Of the key producing countries, Germany recorded the largest pig price rise over the past eight weeks, to reach /100kg but since weakening to /100kg. Spain, the Netherlands, and Poland also had also all been increasing, but only Spanish prices continued to rise into the last week to reach /100kg. Conversely, the UK price has remained on a something of a downward trend. For week ended 18 March, the UK reference price stood at /100kg. Some weakening of the pound exaggerated the decline in euro terms. This means the UK price premium over the EU average had been narrowing and was just over 16 in the most recent week. If this is sustained, the improved price competitiveness of UK pig meat, compared to EU product, may ultimately provide some support to UK domestic prices.

3 UK SLAUGHTERINGS AND PIG MEAT SUPPLIES The latest Defra census results indicate that clean pig slaughterings increased a substantial 12% on year earlier levels during February. At 886,200 head, throughputs were also 1% above the same month in This confirms industry reports of ample supply levels, and supports expectations that throughputs could be higher than previously forecast in Q1 this year. England and Wales recorded the largest increase in slaughterings, with numbers up 14% (+88,000 head) on the year. Such a substantial increase in throughputs might indicate that the breeding herd in these regions has been increasing more than Defra s June and December census results suggest. Meanwhile, the NI kill was 5% (+6,000 head) above 2017 levels; the increase in Scotland was a more modest 1% (+200 head). Sow and boar slaughterings also returned to year-on-year growth after five months of decline. At 18,200 head, the number culled was 3% above February Cull sow prices rallied during the month, as EU pig prices increased, which may have encouraged producers to send more sows to slaughter. Average clean pig carcase weights were marginally lower than year earlier levels, at 83.9kg. Cold weather during the month may have restricted growth rates somewhat. Nonetheless, the increase in throughputs meant production reached 76,900 tonnes, 11% above the month in Overall, this means production for the year to date currently stands 10% above the equivalent period last year. Despite significant growth in production in January, UK pork exports were less than 1% higher than year earlier levels during the month, totalling 17,000 tonnes. However, even with lower farmgate prices, the average unit price of these exports was 3% higher. As such, the value of the pork export market was 4% above January 2017, at 22.5 million. The increase

4 partially reflects a shift towards exporting more, higher value, boneless cuts. These export volumes reached almost 3,800 tonnes, 18% above year earlier levels. In contrast to December, exports to China failed to match year earlier levels, recording a 29% decline to stand at 2,600 tonnes. This was the main cause of the drop in bone-in shipments, as China is the UK s primary destination for these cuts. Nonetheless, rising pork shipments to the EU countered the decline in Chinese volumes, with particularly strong growth recorded to Ireland and Denmark. Interestingly, while fresh/chilled shipments continued to make up the majority of exports to the EU, exports of frozen pork increased by more than half. Offal exports were slower month, declining 16% year-on-year to 5,900 tonnes. Shipments to both China and Hong Kong declined by 34% (1,200 tonnes) and 42% (700 tonnes) respectively, which drove the overall fall. Although, increasing trade with the Netherlands and the Philippines minimised the overall drop. Continuing the trend from the latter half of 2017, UK pork imports were recorded behind year earlier levels in January. At 33,000 tonnes, volumes were 17% below January 2017, but this was still 17% above the month in As in previous months, the decline was particularly driven by a sharp fall in shipments from Denmark, although again at 12,000 tonnes these volumes remain elevated above historic levels. However, shipments from the UK s other key suppliers were also recorded as behind 2017 levels, likely reflecting the increase in domestic supplies. Bacon imports were 29% lower than year earlier levels at 14,700 tonnes, continuing the recent trend, as imports from the top three suppliers (Denmark, the Netherlands and Germany) all fell. However, there was some modest increase in imports of sausages and other processed products. Growth for sausages was particularly driven by German shipments (+800 tonnes), whereas more processed pig meat was imported from Poland (+900 tonnes) and Denmark (+700 tonnes). FEED MARKET The continued drought in Argentina has led to the Rosario Grain Exchange to cut its 2017/18 maize production forecast to 32Mt, down 3Mt from its February estimate. The USDA increased its projections for 2017/18 US maize exports by 4.45Mt to 56.52Mt. With Argentinian stocks looking tighter, importers are buying US maize at the fastest pace since the mid-1990s, according to US government data. Minimal precipitation did arrive on US plains (major winter wheat growing area) in late March. However, according to the USDA, drought conditions in US have reduced the rating of winter wheat crops in key growing states in February. In Kansas, just 13% of the crop is now rated as good or excellent (w/e 23 March), compared to 38% a year ago. According to UkrAgroConsult, Ukrainian 2018/19 wheat crop is forecast to rise 1% year-on-year, exports are forecast to rise by 0.5Mt to 17Mt. Barley exports are also set to increase by 0.5Mt from 2017/18 to 5Mt. The continuing drought in Argentina has resulted in forecasts for the 2017/18 harvest being dropped multiple times. Currently the harvest is estimated at 40Mt (Rosario Grain Exchange), a 6.5Mt cut from its February estimate and 17Mt below last year s crop. Some rain did arrive in mid-march which provided some relief to the Buenos Aires province. With further rains forecasted in the weeks ahead, it is hoped that these will reach the northern growing regions. However, some soyabean fields are beyond recovery. The harvest of the soyabean crop in

5 Parana, Brazil s second largest soyabean producing state got back on track after wet weather in February caused delays. The crop is currently forecast at 113Mt (as of 8 March) by Conab (Brazilian government supply agency). High output from Brazil may compensate some of the impact from a lower Argentine production. Brazilian soyabean exports will look to capitalise on the reduced Argentine production. In the latest USDA report, Brazilian export forecasts rose for a fifth consecutive month to 70.5Mt. The spread between UK ex-farm feed barley and feed wheat narrows. The spot premium of UK exfarm feed wheat over feed barley is currently residing at 7.00/t (as at w/e 22 March). Compared to the same point in 2017 the premium has fallen by 18.50/t, driven mainly by an increase of 17.90/t in feed barley prices over the same time. In general terms, feed wheat has a higher nutritional value compared to barley. So when the price of wheat is close to that of barley, it makes sense to increase wheat inclusions at the expense of barley, in most cases. In theory, with the premium of feed wheat over feed barley narrowing in the most recent weeks it would incentivise greater wheat usage in animal feed production, at the expense of barley. However, practically there are limits to which this can occur. Sterling has strengthened against both the euro and the US dollar this month, reaching a high of 1= (22 March) and 1=$1.423 (26 March) respectively. CONSUMPTION The impetus in pork sales recorded in the latter half of 2017 seems to have faded in recent weeks, according to the latest data from Kantar Worldpanel. In the 12 weeks ended 25 February, fresh/frozen pork sales volumes were 3% lower year on year. However, the value of the market was still 1% higher than 2017 levels across the period, as average retail prices increased by 4%. The market seems to have particularly slowed in the most recent 4-week period, with pork sales volumes down 5% on last year. This also translated into a 1% decline in value terms.inflation in the market may be influencing sales. Looking at individual pork cuts, those that recorded the largest increase in retail price (loin and shoulder roasting, marinades and belly) also recorded the largest decline in sales volumes. While pork, beef and lamb sales volumes have all been falling, as retail prices increase, chicken has recorded the opposite trend. In particular, there has been an 18% increase in in-store promotions on chicken breast; the average price of fresh chicken breast fell 3% over the most recent 12-week period. The increased price competitiveness of this rival protein may be limiting demand for pork at present. Nonetheless, processed pork did continue to record some growth over the most recent 12-week period. Bacon in particular recorded a modest 1% growth in sales volumes, with rising prices boosting

6 this to 3% in value terms. Ham and sausage sales volumes were also more stable, though again there was growth in value terms due to higher average retail prices. Overall, this meant total pig meat retail sales volumes were stable on year earlier levels during the period, and higher prices meant the market value grew by 3%. Trends in retail meat purchases (period ended 25 February 2018) This pig meat sector UK market update was prepared by: Abbie Schofield, Bethan Wilkins and Duncan Wyatt, AHDB Market Intelligence Phone: +44 (0) /8757/ #PorkMarketNews While the Agriculture and Horticulture Development Board seeks to ensure that the information contained within this document is accurate at the time of printing, no warranty is given in respect thereof and, to the maximum extent permitted by law, the Agriculture and Horticulture Development Board accepts no liability for loss, damage or injury howsoever caused (including that caused by negligence) or suffered directly or indirectly in relation to information and opinions contained in or omitted from this document. AHDB Pork is part of the Agriculture and Horticulture Development Board. Agriculture and Horticulture Development Board All rights reserved.