Key data. Average GB carcase weight - kg kg weaner price - /head kg weaner price - /head

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1 Pig Market Trends March 217, Issue 142 In this issue UK pig herd recovering in December According to the latest figures from Defra, the UK pig herd as at 1 December 216 had increased by 3% on the year earlier, to 4.5 million head. This increase came from an upwards revision in both the breeding herd and fattening pig numbers, which were up 2% and 3% respectively. When looking more closely at the breeding herd change, this was predominantly driven by a 3% increase in in-pig sows. In addition, volumes of in-pig gilts also grew, by 9%, on the year earlier. Conversely, numbers of maiden gilts were back by 6%. These figures would suggest that producers are starting to expand their breeding herds and putting more gilts into pig when they are ready, rather than waiting. Turn to page 4. Have Danish pork imports really expanded? According to HMRC data published by Global Trade Atlas, imports of Danish pork to the UK grew by a substantial 73% on the year during 216, almost reaching 17, tonnes shipped weight (sw). However, the extent of this growth has been called into question, with the official Danish export figures only showing a relatively modest 1% growth on the year. So, how much Danish pork has really been landing on UK shores and are the volumes an increasing threat to British producers? Find out more on page 5. Ongoing positivity for EU pig prices UK producers, like those across the EU, are currently experiencing much more positive market conditions than this time last year. Pig prices across Europe recovered significantly as 216 progressed, aided by strong growth in demand from Asian markets and some eventual tightening of supplies. For the UK, price growth was particularly consistent, aided by the weakening of sterling against the Euro following the Brexit vote. Moving into early 217, EU finished pig prices have held up reasonably well against the usual seasonal decline, as tight supplies are now keeping the market largely in balance. What developments can be expected as the year progresses and what might this mean for UK producers? Read further on page 7. CONTENTS UK Market Snapshot 2/3 UK Market Analysis 4/5 EU Market Snapshot 6 Global Market Analysis 7/8 Feed Market 9 In Brief 1 Key data Feb-17 Pages Change since Jan-17 Change since Feb-16 Average GB carcase weight - kg kg weaner price - /head kg weaner price - /head GB APP (Euro-spec) - p/kg dw GB SPP (Euro-spec) - p/kg dw EU Reference price - /1kg dw UK Reference price - /1kg dw UK weekly clean pig kill - head UK weekly pig meat production - tonnes UK pork imports - tonnes* UK bacon imports - tonnes* UK pork exports - tonnes* Retail pig meat sales - tonnes LIFFE feed wheat futures - /tonne CBOT Soyameal futures - $/tonne * Figures relate to January 217 Figures include household purchases of pork, bacon, sausages and ham and relate to 4 weeks to 26 February 217 Interested in data? Get more detail about these and other areas from the AHDB Pork website We are now on Twitter. For regular updates about the UK pig market and related publications, follow #PorkMarketNews pork.ahdb.org.uk Pig Market Trends/Published March 217 Issue Page 1

2 kg head p/kg dw UK Market Snapshot GB pig prices saw another small fall during February, with the monthly average EU-spec APP declining.66p on the previous month to stand at p/kg. However, with sharper falls occurring during this period in 216, the price remained over 36p above the equivalent year earlier figure. Tight supplies helped to keep the market largely in balance during a period when demand is typically weak. Into March, the APP has now begun to increase slightly, reaching p/kg for week ended 11 March. With demand expected to pick up as the weather improves over the next few weeks, further buoyancy may be felt in the pig price. Especially as supplies are expected to remain tight. GB finished pig prices SPP 215 APP 215 SPP 216 APP 216 SPP 217 APP 217 February. 3kg weaners continued their upwards march, climbing 58p on the previous month to average at 55.73/head. This was the highest monthly price since July 214. However, the figure has subsequently fallen back moving into March. In contrast, 7kg weaners showed a modest decline of 44p during February, averaging at 38.49/head. This was the first month-onmonth decline since March last year, though the price has since been largely stable. UK clean pig slaughterings in February were 12% lower than the same month in 216, at 769 thousand head, according to latest figures from Defra. This continues the trend seen over the past few months of a fall in throughput year on year. This is partly due to an assumed contraction in the UK breeding herd, which happened last year. Estimated weekly GB clean pig slaughterings Source: AHDB Market Intelligence The EU-spec SPP followed a similar trend to the APP during February, declining by.91p to p/kg. The gap between the APP and the SPP widened further and reached 3.44p during the month as the SPP fell slightly more than the APP. The gap has continued to widen into March, even though both price series have seen some recovery. Average carcase weights for GB finished pigs APP 215 APP 216 APP 217 SPP 215 SPP 216 SPP Source: AHDB Market Intelligence The average monthly carcase weights for both the SPP and APP samples fell back slightly during February from the record highs reached the previous month. The SPP sample averaged at 84.2kg, which was still slightly heavier than in the month last year, by just 9g. Weaner prices showed diverging trends during Source: AHDB Market Intelligence Once the figures were adjusted to account for the extra working day in February 216, overall slaughterings were still down by 9%, while sow slaughterings recorded a decrease of 18% year on year at just under 18 thousand head. Similar to clean pig slaughterings, the trend in sow slaughterings follows the downward trend seen over the past months. In February, carcase weights were marginally higher (4g) on the year at 83.9kg/head. Furthermore, due to the reduction in throughput and only a slight increase in carcase weights, pig meat production in February fell by 9% on the year at 67 thousand tonnes. At 16.8 thousand tonnes, UK fresh/frozen pork exports during January showed a small decline on the same month a year earlier, of less than 1%. However, improved pig prices relative to 216 ensured the value of these exports was still up 2% over this period, at 21.5 million. With production during January behind year earlier levels, the only modest decline in shipments indicates a growing importance for exports in the UK pork market. Within the relative stability, there were shifts in the importance of individual country destinations. Chinese volumes continued to show year-on-year pork.ahdb.org.uk Pig Market Trends/Published March 217 Issue Page 2

3 tonnes (product weight) % change tonnes (product weight) UK Market Snapshot growth, with shipments up 32%, despite likely arriving too late for the key Chinese New Year period. All other major destinations saw overall declines in volume, likely influenced by the tight supply situation. German shipments were 11% behind January 216 levels, following lower sow slaughter levels during the month. There was overall growth on the year for shipments of offal, bacon and processed pork products during January, though the total volume of these products exported is much smaller than that of pork. UK pig meat exports Offal Processed Sausages Bacon Pork Source: HMRC Import of fresh/frozen pork continued to show strong year-on-year growth during January, with volumes growing 39% on the year to reach 39.2 thousand tonnes. Following the trend of recent months, this increase was largely due to a substantial 73% increase in imports of Danish pork. Doubts persist over the validity of this increase and AHDB are currently investigating the matter further. UK pig meat imports Processed Sausages Bacon Source: HMRC Nonetheless, with imports from Germany, the Netherlands and Spain also showing growth on the year, it seems more imported pork arrived in the UK during January this year. Bacon, processed products and offal imports also showed growth on the year. Offal Pork January 16 January 17 Offal Processed Sausages Bacon Pork Offal Processed Sausages Bacon Pork January 16 January 17 Tight UK supplies have likely boosted imports, despite the devaluation of sterling decreasing the competitiveness of this product. Even in euro terms the import prices of both pork and bacon were still up on a year earlier. The share of pork retail prices received by producers rose in February, averaging 4.5%. This represents half a percentage point increase on January and the largest share since July 214. While the EU-spec APP lost.7p/kg on the month during February, the average retail price recorded a greater decline of 6.7p/kg. This lead to the increase in the producers share month on month. The 12 weeks to 26 February were a mixed bag for pig meat sales, with some differences between categories, according to data provided by Kantar Worldpanel. Volumes of loin roasting joints and cuts pre-coated with marinades (a small part of the market) suffered the most, down year on year by 15% and 25% respectively. The news was brighter for mince (up 14%) and belly (up 11%). Bacon, the biggest category by sales, remain largely unchanged. Lamb continued to perform poorly in the period while beef sales were up over 2% compared with the same period a year before. Annual percentage change in retail meat purchases (12 weeks to February 217) Pork Bacon Sausages Sliced Cooked Meats (Ham/Pork) Source: Kantar Worldpanel Across most categories, retail prices for pig meat for the period were quite stable for fresh/frozen pork, with only a few exceptions in other categories. Therefore, many of the volume falls also directly translated into falls in expenditure too. The retail prices of some added -value products rose in price, such as pork pies (up nearly 1%) and sausage rolls (up 6%). In the case of sausage rolls this did not impact the volume of sales. Spend on processed products overall did improve year on year in the period. Although the weather has been distinctly changeable of late, spring is around the corner which could lend support to a market, given it is a period where demand can normally be expected to pick up. Beef Value Volume Poultry pork.ahdb.org.uk Pig Market Trends/Published March 217 Issue Page 3

4 % change UK Market Analysis UK pig herd recovering in December According to the latest figures from Defra, the UK pig herd as at 1 December 216 had increased by 3% on the year earlier, to 4.5 million head. This increase came from an upwards revision in both the breeding herd and fattening pig numbers, which were up 2% and 3% respectively. When looking more closely at the breeding herd change, this was predominantly driven by a 3% increase in in-pig sows. In addition, volumes of in-pig gilts also grew, by 9%, on the year earlier. Conversely, numbers of maiden gilts were back by 6%. These figures would suggest that producers are starting to expand their breeding herds and putting more gilts into pig when they are ready, rather than waiting. This activity could be largely attributed to the improvement recorded in the pig price, with the EU-spec SPP up almost 4p/kg since its low point in April 216. In addition, export demand has been increasing through 216 and into 217, so the appetite is there to produce more pigs for slaughter. The increase in the UK pig herd, in particular the rise in the number of slaughter pigs, comes at a time when total Defra slaughterings for 216 were up 1% on the year earlier, to 1.7 million head. However, due to a change in reporting periods, the production figures are a little overstated. When we compare like-for-like time periods, slaughterings largely stood on year earlier levels. These movements support the inference that, in fact, the December 215 Defra slaughter pig numbers were understated especially given that production levels in the first half of 216 were up on the year earlier, and fell back later in the year. As a result, the December 216 figures may be overstated, given slaughter volumes in 217 to date. Pigs on UK commercial agricultural holdings, 1 December % change head Total pigs 4,422 4, Female breeding herd In-pig sows In-pig gilts Other sows Maiden gilts Boars for service Feeding pigs 3,921 4,33 +3 Under 2kg 1,144 1, kg 1,13 1, kg Over 8kg Source: Defra Both the Scottish and the Northern Irish (NI) breeding herds also recorded upward movements, helping to bolster overall UK numbers. As at 1 December, the number of breeding pigs in Scotland was 1% higher than the year earlier, at 37,8 head. However, the number of in-pig gilts was back by 9%, which would imply that the breeding herd is not being restored at the same rate as December 215. This increase in the breeding herd comes at the same time as extra slaughter capacity has been created in Scotland, following a major redevelopment. The female breeding herd also increased in NI, by 1% over the same period, to 43,8 head. Changes in pig herd by UK country December December Breeding sows Feeding pigs Breeding sows Feeding pigs Breeding sows Feeding pigs Breeding sows England and Wales Scotland Northern Ireland UK Feeding pigs Source: Defra, Scottish Government, DAERA The upward revision of the UK breeding herd comes at a time when pig producers are in a much better situation than a year earlier, and the directionality is in line with previous AHDB forecasts. Export demand, particularly from China and a tightening of supply has driven the pig price forward. Therefore, it makes sense that producers will be beginning to expand their herds to capitalise on the stronger price and satiate demand. Efficiencies and productivity continue to improve, through better genetics and the relatively low cost of feed, which may subdue a significant increase in the breeding herd. UK sow and boar slaughterings were back in January and February 217 on the year earlier, at 19,2 and 17,7 head respectively. This again further supports evidence of producers starting to expand their breeding herds. While feed costs have started to increase since the summer, they are still some way behind the levels seen in 212, so are no deterrent to expansion. Production is forecast to be back in the first half of 217 given developments in the first quarter and forecasts into the second before recovering in the latter half of the year. The increase in the breeding herd and the number of piglets would support this. More detail on how supply levels are likely to develop will be clearer following the release of AHDB Pork s updated forecasts next month. pork.ahdb.org.uk Pig Market Trends/Published March 217 Issue Page 4

5 tonnes UK Market Analysis Have Danish pork imports really expanded? According to HMRC data published by Global Trade Atlas (hereafter GTA/HMRC), imports of Danish pork to the UK grew by a substantial 73% on the year during 216, almost reaching 17, tonnes shipped weight (sw). However, the extent of this growth has been called into question, with the official Danish export figures only showing a relatively modest 1% growth on the year. So, how much Danish pork has really been landing on UK shores and are the volumes an increasing threat to British producers? The growth in shipments received from Denmark according to GTA/HMRC figures seems unrealistic when compared to Danish pig meat production during 216. According to Eurostat, Denmark produced 1.57 million tonnes of pig meat during 216, 2% less than in the previous year. If the pork volume received from Denmark according to GTA/HMRC is correct, this would mean exports of pork to the UK accounted for 11% of Danish production during 216. This is an increase of five percentage points compared to the previous two years. According to Danish figures, an extra 55 thousand tonnes of pork was shipped from Denmark to China last year. In addition, there were only relatively small decreases in exports to the key markets of Germany and Poland. Assuming no dramatic downturn in domestic consumption occurred, it therefore seems doubtful that Denmark actually produced sufficient pork to fulfil the GTA/HMRC figures. This sentiment is backed up by industry sources in Denmark. The Danish pork import growth during 216, according to GTA/HMRC, is also surprising due to the weakness of sterling reducing the competitiveness of imported product in the latter half of the year. Also, with consumer demand from the UK remaining lax, the increasing volume of imported pork on the UK market might have been expected to depress pig prices. However, this does not seem to have been the case, given the record 37 week period of week-on-week price rises seen by the SPP from April to the end of last year. Difference between figures for UK imports of Danish pork and Danish exports of pork to the UK UK 215 UK 216 DK 215 DK 216 Source: IHS Maritime & Trade - Global Trade Atlas So what might be the cause of this increase in the GTA/HMRC Danish pork import figures? Comparing Danish pork export figures and UK import figures for the past two years highlights that the two have never matched entirely, but did follow similar trends up to April 216. However, between April and June 216, the GTA/HMRC Danish imports figure increased dramatically, a movement which was not reflected in the Danish exports figure. After June 216, the two series seem to have roughly followed the same trends again. Breaking this increase down, around two-thirds of the annual growth in the GTA/HMRC figures is attributable to fresh/chilled bone-in hams/shoulder cuts, which comprise over half of the total product imported. Proportionally, however, more growth was seen from the not elsewhere specified or indicated pork category. Within this, boneless cuts (excluding bellies) in particular saw a sharp rise in imports from May onwards, with volumes for the year as a whole trebling on 215. In contrast, Danish figures for this category showed a 9% decline on the year. Interestingly, the increase in imports of boneless pork actually brought the GTA/HMRC figures closer in line with the Danish export figures for this category, which they have historically trended below. The surplus UK imports, relative to the Danish figures, instead originate from other otherwise uncategorised cuts, particularly those with bone in, which in some cases Denmark does not report sending to the UK at all. Despite the confusion, Danish industry sources suggest that, in reality, there was only a small increase in pork shipments to the UK last year. Bacon shipments are reported to have shown a compensatory decline. This sentiment supports the movements reported in the Danish exports figures, where the decline in bacon shipments to the UK is broadly similar to the increase in the volume of pork sent. Overall, while the source of the increase in GTA/ HMRC figures remains unclear at present, it does seem clear that this increase does not reflect the reality of the situation. While some degree of growth in imports seems possible, given the decline in UK production, market signals do not indicate huge volumes of Danish pork have arrived on UK shores. This therefore highlights the importance of interpreting trade data with caution and in the context of other market signals, to ensure a coherent overall picture is drawn. AHDB will be further investigating this matter, with the aim of ultimately clarifying the issue. pork.ahdb.org.uk Pig Market Trends/Published March 217 Issue Page 5

6 head /1 kg dw tonnes EU Market Snapshot Up to week ended 12 March, EU prices for pigs had remained range-bound for the year so far, although that may now be starting to change. The EU average pig reference price was quoted at /1kg for this latest week, up 1.54 on the week before, and 29 more than the price a year ago. A stable market price had suggested that supply of pig meat was relatively well balanced with demand. However, a decline in the EU breeding herd from Dec 215 to Dec 216 of nearly 2%, and high weaner prices, are both supportive of a tightening supply picture. So, prices could receive a further boost in the coming months, when demand is also expected to pick up. EU average Pig Reference Price 18 the US imported only 6,3 tonnes, nearly 2% less than it had in January 216. EU Fresh/Frozen Port Exports Source: EU Commission Source: EU Commission Signs of price recovery have been seen in a number of key producing states, with German prices gaining 2.23 in week ended 12 March to stand at /1kg. Spanish prices have seen an increase of over 8/1kg over the past four week period. Industry reports suggest that supplies of finished pigs have been behind demand from slaughterhouses, particularly in Spain where export demand is strong. Conversely, the market has remained more balanced in Denmark where prices have been largely stable. The UK reference price has fallen in euro terms in recent weeks, due to some overall weakening in sterling. In sterling terms, the reference price actually showed some recovery, following from the tight supply situation currently in play. After a successful 216, exports of fresh/frozen pork from Europe started the New Year strongly. Volumes exported from the EU in January were up over 2% compared with the same month last year, at 187,3 tonnes. The strong prices seen at the end of 216 have continued, meaning the value of exports was up by even more, 34% higher than January 216 and totalling 447 million for the month. Shipments to China bucked the trend of recent months, up nearly 27% compared with January 216 and the main driver of overall EU export growth. Exports to Australia and some Asian countries, such as Hong Kong and South Korea, also showed increases. In contrast, Source: Eurostat, HIS Maritime & Trade Global Trade Atlas EU offal exports did not show the same gains as pork, although they did record an increase of nearly 14% compared with January last year, chiefly driven by a 25% rise in volumes sent to China. China and Hong Kong combined imported 92,4 tonnes of EU offal in January, making up over three quarters of Europe s offal export market that month. Surprisingly, pig slaughterings within the EU were marginally up for 216 as a whole, given the decline in the breeding herd reported in both December 215 and June 216. According to the latest Eurostat figures, at 257 million head, they increased by almost 1% on the year. This still represents a slow down on the almost 3% growth rate in 215. Continuing improvements to sow productivity will have mitigated the impact of the smaller sow herd. At over 23 million tonnes in 216, production was up ahead of the increase in slaughterings, as carcase weights averaged.5 kg higher. EU Pig Slaughtering Trends 23, 22,5 22, 21,5 21, 2,5 2, 19,5 19, 18, , Source: Eurostat Source: Eurostat Spanish production was 5% higher year-on-year, as increasing vertical integration continued to drive profitability and expansion. A 3% growth in Polish production was also above the EU average. Production in Germany was stable on 215, but Denmark reported a 2% decline, with increasing numbers of young pigs exported for finishing. pork.ahdb.org.uk Pig Market Trends/Published March 217 Issue Page 6

7 Global Market Analysis Ongoing positivity for EU pig prices UK producers, like those across the EU, are currently experiencing much more positive market conditions than this time last year. Pig prices across Europe recovered significantly as 216 progressed, aided by strong growth in demand from Asian markets and some eventual tightening of supplies. For the UK, price growth was particularly consistent, aided by the weakening of sterling against the Euro following the Brexit vote. Moving into early 217, EU finished pig prices have held up reasonably well against the usual seasonal decline, as tight supplies are now keeping the market largely in balance. What developments can be expected as the year progresses and what might this mean for UK producers? The legacy of low pig prices early in 216 continued to be reflected in the December pig census figures. The EU breeding herd was back almost 2% compared to a year earlier. This was a similar decrease to that seen in 215, and has driven the currently tight supply situation. The falling breeding herd was driven by movements in a majority of Member States, including the key producers Spain and Germany. However, some Member States did counter the general trend and reported expansion; most notably Poland. Hence, there are some signs the improved price situation may now be sowing the seeds for a future return to industry growth. Overall, the reported fall in the female breeding herd in December was actually reasonably modest. On top of this, maiden gilts were stable on the year while in-pig gilts increased in number. As such, the overall EU breeding herd might now be expected to stabilise. EU pig census results, December % change head Total pigs 148, , Female breeding herd 12,293 12, In-pig sows 6,911 6, In-pig gilts 1,5 1, Other sows 2,39 2, Maiden gilts 1,491 1, Boars for service Feeding pigs 136, , Under 2kg 41,75 41, kg 34,271 33, kg 27,6 27, Over 8kg 24,112 24, kg or over 8,535 8, Source: Eurostat EU pig producers had been in a loss making situation for over two years, it having started in the second half of 214. However, the return to profitability during the second half of 216 was too late to significantly impact on the breeding herd by December. The situation has not been helped by the fact that many breeding units in particular have accumulated considerable losses. Despite the falling breeding herd and somewhat surprisingly, pig slaughterings were virtually static compared to the previous year in 216. Increased sow productivity contributed to this development, a factor which will continue to influence slaughtering trends in 217. Eurostat figures indicate net production actually showed a marginal increase of around 1% on the year, likely related to increasing carcase weights. Despite this, the overall deflation of the breeding herd did translate into a 1% decline in the total number of pigs in December. This was particularly driven by animals in the lower weight bands, providing confirmation that the number of pigs available for slaughter is currently behind year earlier levels. The tight supplies of young pigs have been reflected in the EU weaner prices in recent months, which have skyrocketed. However, this has not yet been reflected by a similar increase in the finished pig price, with lower demand for pig meat balanced by reduced supply. However, there is clearly optimism about finished pig prices in the short to medium term, as supplies tighten further just as the seasonal increase in demand hits. Indeed, an increase in finished pig prices will be needed if erosion of finisher margins is to be avoided, given that feed costs are edging up. Annual change in pig and sow numbers in selected EU Member States, December % 4% 2% % -2% -4% -6% Total pigs Breeding Sows Source: Eurostat The decline in the breeding herds and so rising demand for scarce weaners has led to some interesting developments at member state level. Denmark in particular has seen a 3% decline in total pig numbers, while the breeding herd has remained stable, due to increasing specialisation in live exports. Germany and Italy have been key recipients of these pigs, minimising the declines in their finishing pig herds and production levels despite falling numbers of breeding sows. As such, Germany has remained the largest pork.ahdb.org.uk Pig Market Trends/Published March 217 Issue Page 7

8 /1 kg dw % change Global Market Analysis producer of pig meat within the EU during 216, despite Spain now hosting the largest pig herd. Poland has also been a growing recipient of foreign weaners, following from a significant decline in both the breeding and finishing herds in the previous year. Based on these December census results, the EU Commission s forecasting working group for pig meat updated its forecasts at its meeting in Brussels in early March. For the EU as a whole the pig supply situation is expected to tighten to a small degree in 217. Pig prices should remain firm although possibly no longer above year earlier levels in the second half. This analysis is based on forecasts from group members, coupled with official ones from those Member States not represented at the meeting. For 217 as a whole, slaughterings are forecast to fall 1%. The largest year-on-year decline is expected in the second quarter given the shortages of weaners in the EU so far this year. For the second half of the year, the annual rate of decline is expected to slow down somewhat. Annual change in EU pig slaughterings Annual change in EU pig slaughterings The EU pig price is again forecast to rise during the spring and summer, assuming favourable seasonal demand led by the grilling season. Such price developments apply to all key member states with the possible exception of Italy. But how is the pig meat supply and demand balance likely to pan out during this year and how will that impact on prices? Pig meat demand in the EU is already under some pressure with consumption in decline. The forecasting group meeting indicates further declines in 217 in key consuming countries, led by Germany, where a fall of at least 1% is forecast. Only in France is pig meat consumption expected to increase in 217. The prospects for exports also seem less positive than in 216. Competition from the other main exporting countries, namely North America and Brazil, is already intensifying on the key Asian market. One consolation though is that the Chinese market could be firmer than previously expected. The USDA Beijing attaché forecasts of late February indicate that its imports will now be higher than previously thought. The organisation had been expecting a decline in in 217 but now sees a rise of 2%. Actual and forecast grade E EU average pig reference price Q1 216 Q2 216 Q3 216 Q4 216 Q1 217 Q2 217 Q3 217 Q4 217 Sources: Eurostat, AMI, EU Commission pig meat forecasting working group Of the key producing countries, gross indigenous slaughter (GIP) in Germany is expected to be down by over 1%. However, this is being offset by increased imports of weaners for finishing to counter shortages from local breeders. Spain continues to emerge as an increasingly key producer. GIP is now the largest in the EU, with strong growth of around 4% in both 216 and 217. Such developments would again allow Spain to further consolidate its position as the second largest pork exporter after Germany. Poland has become another key player on the EU pig market, both as an importer and exporter of pig meat. GIP is expected to recover in 217 and net slaughterings could move up by an even greater amount as more weaners are imported. GIP in Denmark is expected to be more stable in 217 after the increase of previous years. However, another decline in net slaughterings seems probable as more pigs are exported (actual) 217 (forecast) 12 Source: EU Commission How these trends affect the UK market will, of course, also depend on exchange rates. But, there are currently no signs that sterling will move up significantly against the euro, suggesting that import prices will have to remain higher than before the Brexit referendum. In the second half of 216, the import price for pork was 2% up on the first half of the year. Such developments could also impact on import volumes. The March forecasts indicate that the recovery in the EU market over the course of 216 should be maintained in 217. However, by the autumn months the upturn in momentum may have ended. At least though, producers should remain in a profit making situation even though feed prices have moved up in recent months. This in turn could result in renewed expansion in the pig herd and eventual upturn in EU pig slaughterings in 218. However, as for a number of years, annual variations in pig slaughterings are small. pork.ahdb.org.uk Pig Market Trends/Published March 217 Issue Page 8

9 per tonne Million tonnes /t Feed Market Grains Since 24 February, UK feed wheat futures (May-17) have risen 2% to close at around 149/t on Tuesday 21 March. Over the same timeframe, new crop futures (Nov-17) also risen, by 2.5%, to close at almost 14/t. The discount from old crop to new crop prices is now around 9/t, the largest since early March when the gap reached around 1/t. At the beginning of March, Defra released the second official UK supply and demand estimates. The wheat balance sheet has been heavily influenced this season by increased demand from bioethanol companies for industrial uses and the poultry sector for animal feed. UK wheat surplus available for export or as free stock year average# 214/15 215/16 216/17* Dec 216/17* Mar #211/12-215/16 *Forecast Source: Defra The poultry sector is one of the driving forces behind feed wheat demand this year, particularly for broiler diets. Production of both sheep and other sectors feed demand has also been stronger this season. However, with poultry diets comprising of around 6% wheat, growth in this industry affects this commodity more so than other grains. This has led to the wheat balance for 216/17 to be forecast at the lowest level since 213/14. With exports between July and January at 1.16Mt and an operating stock requirement of 1.6Mt, the surplus available to export for the rest of the season or to be carried over into the next is relatively small, at 317Kt. For barley, overall demand was unchanged on the previous estimates made in December, with a slight reduction to human and industrial demand offset by a similar increase in animal feed demand. The feed barley discount to feed wheat has increased further, with UK ex-farm feed barley prices (as at 16 March) 25.3/t lower than UK ex-farm feed wheat prices. This means that the inclusions of barley in certain diets, such as pigs and ruminants, are expected to be at relatively high levels for the rest of the season. UK ex-farm average feed barley discount to feed wheat Source: AHDB Proteins Since 24 February, Chicago soyabean futures (May-17) have fallen by 2%, as the South American record harvest looms closer. Between 24 February and 1 March soyameal prices (spot, Brazilian 48%, ex-store, Liverpool) increased by 1%, to 333/t on 1 March. UK delivered rapeseed prices (spot, Erith) have also increased between 24 February and 17 March, by 1%, to 359.5/t on 17 March. Paris rapeseed futures May-17 Nov-17 3/t 29 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Source: AHDB The discount of new crop rapeseed prices (Nov-17, Paris futures) to old crop (May-17) has widened further. The discount now stands at around 3/t and is the largest in the season so far. At this point last season, the discount was only around 2/t which suggests that market was already pricing in the tight supplies for 216/17. The large discount at present is essentially the market factoring in some bearish information that could influence new crop prices. For example, the large Ukraine rapeseed area and good conditions of the rapeseed crop across the EU. Furthermore, Germany s farm association recently forecast its winter rapeseed crop at 4.86Mt in 217 (up 5.6% year on year). pork.ahdb.org.uk Pig Market Trends/Published March 217 Issue Page 9

10 In Brief Pig farm incomes forecast to recover The average Farm Business Income (FBI) for specialist pig farms in England is seen to have more than doubled in 216/17 year on year, from 21,6 to 57,, according to the latest forecasts from Defra. The increase will have been welcomed by specialist pig producers, who have seen farm business incomes falling since 213. A rise in pigmeat prices, driven by a combination of weaker sterling and tighter supply, is behind the increased forecast. However, although weaner, cull sow and store prices have increased, feed costs have risen too. Understandably not all producers will benefit from the forecast increase in farm business equally, as contracting terms differ across the sector. Record exports and roller coaster prices the global pork market in 216 Pork export volumes from the four major pig meat exporters (the EU, US, Canada and Brazil) excelled last year, exceeding 5.5 million tonnes. On top of this, based on prices from the aforementioned countries, the value of the market also recovered from the lows seen early in 216. The average pork export price started 216 at only $2.31/kg, the lowest price for more than six years. However, by October, tighter supplies in a number of key producing states, coupled to a significant increase in Chinese demand for imported pork, saw average prices climb to $2.66/kg. Despite this, in the final two months of the year, export prices again began to tail-off, with the December average standing at $2.57/kg. This was driven by a decline in the US export price during the latter quarter, as production began to escalate. The increasing volumes available from the US put pressure on the other key global exporters, with the Canadian price falling in line with the US. The EU price also dropped after the US price fell below it in October. This was also partially influenced by the appreciation of the dollar following the election of Donald Trump, however EU export prices did also show a small decrease in euro terms, in order to remain competitive. Currency movements were also important for the recovery of the Brazilian price, in dollar terms, as the value of the Brazilian real against the US dollar increased. The downturn in export prices seen at the end of 216 could ultimately start to put downward pressure on UK prices, which have so far held up reasonably well against the usual seasonal decline at the start of 217. The extent of this will depend upon the level of competition from the Americas on export markets, and how demand from China develops as the year progresses. However, the UK may be somewhat shielded from declining global prices due to the weakness of the pound, which could support prices in sterling terms whilst remaining competitive on the global market. Will latest WTO ruling enable EU trade with Russia to resume? Russian pork imports declined again during 216, with shipments for the year dropping below 3, tonnes for the first time since 2. One reason for this is that trade with the EU has been affected by the implementation of bans in 214. The Russian ban on imports of pig meat products from the EU has been in place since early February 214. The substantial live pig trade also ceased. It was officially stated for health reasons, due to an outbreak of African Swine Fever (ASF) in areas of the EU close to the border with Belarus. This resulted in a total EU ban. However, last August the World Trade Organisation (WTO) declared this ban illegal, due to a lack of real health and sanitary risks. This went to appeal but was turned down with the WTO announcement on 23 February. As such, Russia theoretically has no choice but to withdraw this ban and allow trade to resume within 28 days. Despite this, even if this sanitary ban were to be withdrawn, the EU would still be unable to export to Russia. This is due to a second politically-motivated ban on agri-food products imported from the EU, originally implemented in August 214. Product from Canada and the United States was banned at the same time. However, live pigs for breeding, offal and pig fat are outside the scope of this ban, and so EU trade of these products in principle could resume. Read more about these and other stories in Pig Market Weekly. To view past editions or to subscribe, click here. This publication and its content is produced by the AHDB Market Intelligence team whose systems are certificated to ISO 91:215 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 217. All rights reserved. pork.ahdb.org.uk Pig Market Trends/Published March 217 Issue Page 1