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UK/EU Pig Market Update - August 2003

by 5m Editor
29 August 2003, at 12:00am

By the UK's Meat and Livestock Commission - This MLC report looks at the current market situation in the UK and reviews recent price trends and markets throughout Europe.

Producer Prices

Meat and Livestock Commission

United Kingdom producer prices peaked in mid-June, and have since fallen sharply. The UK Eurospec price in the week ended 16 August fell to 97p/kg dw, just 2p lower than at the end of July, although the alternative DAPP price series (which contains a higher proportion of contract prices, was down 3p to 98p. The declines seen during July and August have, however, closely tracked the changes seen at this time in both 2001 and 2002. Consequently, prices have remained above corresponding 2002 levels, up by 8p in the week ended 26 July. The following graph shows that prices fell to their seasonal low point in late August/ early September in the previous two years, and this pattern could well be repeated in 2003, as indications are that the market is stabilising.

Seasonality of GB Pig Prices

UK market prices in the first half of this year generally benefited from a combination of lower throughputs at abattoirs and from the weaker sterling exchange rate relative to the Euro. Both these factors are still relevant, but prices fell sharply in July and August due to two other factors:

  • Extended periods of very hot weather, which had an adverse impact on demand for fresh pork
  • The developing premium of British prices over Continental EU prices (particularly Danish and Dutch prices), which encouraged usage of imported pig meat.

Acute shortages of weaner supplies, resulting from breeding herd contraction and problems with sow infertility, meant that prices strengthened considerably during the first few months of 2003. Between April and June the market was fairly stable, at £37-£39 a head, but prices have subsequently fallen sharply, in line with the weaker finished pig market. The average price of 30kg weaners in late July , at £32 a head, was £6 down on two months earlier.

Reduced sow supplies, particularly from April onwards, and the impact of a weaker sterling have also led to a generally firmer cull sow market this year. Sow prices averaged around 55p/kg dw in April and the first half of May, but they fell back 3-4p in the second half of May amid reports of Germany being swamped with cull sows from Poland. Germany is reported to have remained a difficult market, and cull sow prices have generally fluctuated within the 49-53p range since May.

Comparison of UK and EU Pigmeat Reference Prices (a)

(a) Price based on EU dressing specification adjusted to cold carcase weight. These are gross prices before deductions for transport, etc. MLC estimates that the typical deduction in the UK is 4.5p/kg compared with an EU average of 2.6p

The average EU price, which had firmed slightly in July due to a combination of some shortage of supplies and firmer demand, showed little further change in August. Danish prices fell by a further three per cent but there was a five per cent increase in German prices. With the UK price continuing to weaken, the UK price premium over the overall EU price averaged fell to 3p/kg in August, down from around 20p in June.

UK pig meat prices remain significantly higher than in Denmark and the Netherlands, the main overseas suppliers to the UK market, but the difference in prices has fallen during July and August. Prices in Denmark, where the market has been affected by a sharp drop in export sales to Russia following the introduction of a Tariff Rate Quota in April, are currently 27p lower than the UK price (38p in June) while Dutch prices are 18p lower (29p in June).

Slaughterings

Clean pig slaughter levels have been well below corresponding 2002 levels since January. This has arisen in part from a lower breeding herd but more importantly from deteriorating sow productivity. Defra slaughtering statistics for July indicate that UK throughputs averaged around 168,000 head while preliminary MLC estimates for August indicate that average weekly throughput remained at about the same level.

Trends in GB Weekly Abattoir Throughput

The hot summer weather is also likely to have a longer-term impact on the UK pig meat sector. The heat affected conception rates, which is likely to have a negative effect on slaughter levels in the first quarter of 2004.

Total United Kingdom slaughterings have fallen less markedly than GB slaughterings. This is because of an increase in Northern Ireland, where the breeding herd has been more stable than in Great Britain. Northern Ireland slaughterings have also benefited from some increase in live pig imports from the Irish Republic.

Estimated Clean Pig Slaughter Levels in August

The actual cause of the decline in supplies in Great Britain since the start of the year is unclear. There may well be no single predominant reason, but a number of factors, including:

  • Reports of some sporadic increases in PMWS incidence in the early part of 2003
  • Some disruptions to breeding patterns and performance arising from a significant number of producers depopulating and then repopulating last year.
A developing sow infertility problem since last Autumn, which affected clean pig slaughter levels in the April-June quarter.

Estimated GB Sow Productivity Trends (a)

The overall impact of these factors on apparent sow productivity (measured by pigs finished per sow per year) has been dramatic. However, GB productivity now appears to have bottomed out, with some small recovery seen in the last couple of months.

UK June Pig Survey Results

The June 2003 pig census results have just been published, and are shown in the following table. These are provisional results only. Revised results will be published in late September, after more returns have come in from producers.

(a) Either being suckled, or dry sows being kept for further breeding

  • Although the breeding herd in June 2003 was down 8% on a year earlier, most of this decline occurred last year. June numbers were in fact only 6,000 lower than in December 2002.
  • In–pig gilt numbers were down 4% on last June. However, as a proportion of the breeding herd they showed an increase. The improvement in the replacement rate compared with last year is in fact more marked than suggested by the figures, as 2002 replacements were artificially boosted in the aftermath of FMD.
  • Maiden gilt numbers were down 7% year on year. However, when expressed as a proportion of the breeding herd, they were at their highest June level since 1997.
  • The sow culling rate in July fell to 43% (the long-term average, a figure broadly consistent with a stable breeding herd) for the first time since 1997 – other than for brief periods affected by CSF and FMD.
  • The slow down in sow culling means that the gap between the culling rate and the replacement rate is disappearing. This suggests that breeding herd numbers are stabilising and that the long-term decline in sow numbers is coming to an end.

Consumption

The period of very hot weather, which began in July, continued into August. Demand for fresh pork and bacon was down as a result, as was demand for lamb and poultry. Household fresh and frozen pork volume purchases were down five per cent in the 12-week period ending 17 August compared with a year ago. However the value of expenditure was unchanged due to higher retail prices. Bacon volume sales were down six per cent in the 12-week period, while expenditure was four per cent lower. Demand for barbecue and picnic products was encouraged by the hot weather. So, for example, volume purchases of pork sausages were up seven per cent while ham and sliced pork sales both by eight per cent.

Changes in Retail Purchases and Expenditure

Source: MLC - 29th August 2003