UK and European Producer Prices

• UK pig prices continued to increase in July. In the week ended 26 July the DAPP stood at 137.2p/kg dw, 4.2p more than four weeks earlier and 26.6p higher than a year ago. These price levels have only been exceeded in one previous period – in 1996, when the BSE crisis led to a switch in consumer demand away from beef to other meats.
  
• UK producer prices in 2008 have benefited from the weaker value of sterling against the Euro, relatively strong consumer demand for pig meat in the first quarter and tightening supplies since April. More recently, rising European prices have had a positive impact on EU prices.
  
• Retail prices have also increased significantly since the beginning of the year. The average retail pig meat price in the week ended 26 July was 34 per cent higher than a year before compared with a 25 per cent increase in the producer price over the same period.

• Cull sow prices have increased particularly sharply. The average price in the week ended 19 July was 112p/kg dw, 9p more than four weeks earlier and 47p above the level of a year ago. Sow prices currently average 82 per cent of the clean pig price compared with the more typical 71 per cent seen in 2005-06.
  
• Nearly all sow meat produced in the United Kingdom is exported, and sow prices have therefore got a major boost from the depreciation of sterling. However the further increases since May have been mainly due to tighter sow meat supplies compared with earlier in the year.
  
• European pig prices continued to edge up in July; in the week ended 27 July the EU-27 average reference price was six per cent higher than four weeks earlier and 18 per cent higher than a year before However, due to the depreciation of sterling against the Euro, the EU price was 34 per cent higher than a year earlier in sterling terms. German, Dutch and Polish prices have increased particularly sharply in the most recent four weeks.
  
• Lower slaughterings in a number of countries are supporting market price levels. In addition, western European countries have benefited from increased eastern European import demand for pig meat and live pigs.

• Relatively stronger EU prices have led to the disappearance of the UK premium over the EU-27 price in recent months. The premium, which averaged 12p/kg in 2007, disappeared in March. In late July the UK reference price averaged 3p less than the EU-27 price.

UK Slaughterings and Production

• Clean pig slaughterings in June were down eight per cent on a year earlier. Overall slaughterings in January-June were one per cent lower than last year, although there was a downward trend between the first quarter (+2%) and the second quarter (-3%).
  
• Provisional results for July suggest a five per cent decline in slaughterings compared with a year ago. The contraction in breeding sow numbers over the past year is likely to mean further falls in weekly throughputs into 2009. However the rate of decline compared with a year earlier is likely to be less marked in August and September because Foot and Mouth Disease restrictions in this period of 2007 led to a decline in slaughterings.

• Sow cullings were at very high levels in the first three months of 2008, a strong indication that the June 2008 livestock survey will record a further contraction in breeding sow numbers. High feed costs and industry losses were the prime drivers of these trends. Cullings have moved lower since April, and are currently very similar to 2007 levels.

UK Trade

• The weaker value of sterling against the Euro this year has made UK imports of pig meat dearer. This has had a noticeable effect on import volumes. In the first five months of 2008, total imports were down 10 per cent compared with a year earlier. Nearly a third less was imported from the Netherlands and a quarter less from Belgium. The Netherlands has diverted its exports to other EU markets, in particular to Germany (+28%).
  
• The exchange rate has also improved the competitiveness of UK pork exports. Exports were up 15 per cent in January-May, with shipments to Germany increasing by 30 per cent. Exports to Hong Kong more than doubled to 5,800 tonnes, making it the fourth largest export market.

Feed Prices

• Latest forecasts for EU grain production indicate a 14 per cent increase in the 2008 harvest. The weather has generally been good in west and east Europe, but not in the north (including parts of Poland and Germany) where it was drier through to June. The forecasts are still subject to change depending upon weather conditions, although significant increases in yields seen inevitable. The suspension of set-aside has also resulted in an increase of about five per cent in the area planted.
  
• Cereal prices moved lower in July in response to the improved harvest expectations as well as competition from Black Sea supplies on the EU market. The ex-farm price in late July was just two per cent higher than a year earlier. Futures prices have also moved lower for the 2008/09 and 2009/10 seasons, although prices are still higher than in the seasons preceding 2007/08.

Consumption

• Retail consumption of pork and bacon in the four-week period ended 13 July was significantly lower than a year earlier. Clearly this was to a large extent due to lower supplies and much higher prices. But it was also due to atypical consumption patterns a year ago. June 2007 was the wettest month on record, and July was much the same. The very wet weather impacted on meat consumption patterns in a number of ways, most notably a switch from processed products to fresh meat consumption.
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• TNS data for the period ended 13 July indicate a decline in retail fresh pork purchases of eight per cent in volume terms compared with a year earlier. However a 15 per cent increase in average retail prices meant that the value of expenditure was actually 12 per cent higher. Higher bacon prices (+17%) meant that while volume purchases were down four per cent there was a 12 per cent increase in expenditure.
  
• The switch away from processed products to fresh meat in June/July 2007 meant that total consumption of processed products in the latest period increased by four per cent compared with a year earlier. Sausage purchases were up six per cent in volume terms and nine per cent in value.
  
• Purchases of belly, which grew strongly last year, have continued to move higher in 2008. In the latest four-week period they grew by seven per cent. However, sales of all other cuts were lower in this period.

Breeding Sow Numbers in the EU

• Eight member states carried out pig surveys in the April - June period that have now been published. The UK June results will be available in September.
  
• The very high feed prices across Europe have led to a contraction in the pig herd in every member state. Polish and Hungarian numbers have also been influenced by restructuring and the ending of access to subsidised feed. In most cases the annual rate of decline has also accelerated compared with the trend in the year to December 2007.
  
• Sow numbers in the eight member states for which mid-year results are available account for 73 per cent of total EU numbers, and will therefore have a considerable influence on the overall EU picture. It is estimated that the total EU breeding herd in June 2008 was nine per cent smaller than in June 2007.

News from Other Countries

• China's live pig production has picked up rapidly despite the feed price hike and the consequences of natural disasters in Southwest China earlier this year, according to China's Ministry of Agriculture (MOA). A survey by MOA of 1,800 scaled farms and 1,800 private farms in 20 pig-raising provinces shows that the number of pigs in stock by the end of June was up 10.6 percent year on year, and pigs slaughtered were up 4.8 percent, according to the Chinese news agency Xinhua. China recently allocated 2.8 billion yuan (about $420 million) from its central budget to support live pig production.