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United Kingdom Pig Meat Market Update - April 2009

by 5m Editor
10 April 2009, at 12:00am

Tony Fowler, senior economic analyst with AHDB Meat Services Economic and Policy Analysis Group, explains the latest trends in pig production in the UK and European Union.

UK Prices

  • Tight pig meat supplies have continued to lift prices on the UK spot market which has had a positive effect on some contract prices. The DAPP stood at 144.6p/kg dw in the week ended 28 March, 5.4p above the level of four weeks earlier and 30p more than a year earlier. Many spot prices are reported to be at or above 150p.

  • Other drivers of the current very firm market conditions are the lower value of sterling against the Euro and a continuing impact of the Jamie Oliver programme. Some switch by consumers from higher priced beef and lamb is also likely to have benefited pork demand.
  • Despite a reported easing in demand for sow meat on the Continent, tight domestic supplies led to an increase in sterling terms during March. In the week ended 28 March the price averaged 119p, 4p more than four weeks earlier.

  • A shortage of weaner availability, due in part to reduced supplies arising from infertility problems last summer, and Improved finished pig prices have been reflected in higher prices on the weaner market. The 30kg average weaner price broke through the £50 barrier in the week ended 21 March, and in the week ended 4 April averaged £52/head. The last time the weaner average was in excess of £50 was in June 1996 when pig prices were benefiting from the BSE crisis. Some spot prices are reported to be in the region of £60.

The EU Pig Meat Market

  • The average European pig price continued to fall into February, despite lower supplies developing in some countries, due to relatively weak demand. Since mid-February prices have improved, and in the week ended 22 March the EU-27 reference price averaged five per cent more than four weeks earlier. The overall price was four per cent lower than a year earlier in Euro terms but, due to the decline in the sterling exchange rate, was up 16 per cent in sterling terms.

  • Polish prices increased particularly sharply in the latest 4-week period (+14%) while Spanish prices were also sharply higher (+10%). Prices in Denmark, which have been hit by difficult export markets in Russia and eastern Europe, were unchanged.
  • There has been a wide range of UK price premia over EU prices (weighted by UK imports) over the past three years. The premium fell to just 1p at the beginning of January but the relative weakness of prices in other EU countries meant that it rose to around 26p by the end of February. This is close to the maximum premium reached in recent years. However it fell back in March, to 22p at the end of the month.

UK Slaughterings and Production

  • Clean pig slaughterings in the first two months of 2009 were significantly lower than a year earlier. Slaughterings in January were seven per cent less than in the corresponding month of 2008 and in February they were down eight per cent. Preliminary results for March indicate a five per cent decline in throughputs.

  • Since October 2008, some marked year-on-year declines in pig slaughterings have been recorded. This is largely because between October 2007 and February 2008 slaughterings were relatively high as abattoirs were working through the FMD-related backlog of pigs. The reduced rate of decline in March is partly due to the weakening FMD-effect.

Trade

  • The low value of sterling contributed to a four per cent increase in UK pork exports during January to over 10,000 tonnes. This was in spite of exports in early 2008 getting a boost from record sow meat production. Germany remained the largest market despite shipments falling by eight per cent compared with year earlier levels as a result of the lower UK sow slaughterings. This fall was more than offset in volume terms by increased demand from Ireland.

  • In contrast to exports, import of fresh and frozen pork fell by nearly 18 per cent in January. Shipments from all the main sources were down on a year earlier. In particular there was a 40 per cent reduction in shipments from Denmark, although volumes imported from Germany and the Netherlands also showed substantial reductions.

Feed Prices

  • The UK delivered feed wheat price at the end of March was £109/tonne, £73 (43%) lower than a year earlier. Soyameal (ex-mill, Liverpool) in the same week averaged £300/tonne, virtually the same as a year earlier.

  • The LIFFE futures market indicates largely unchanged feed wheat prices through to the next harvest, after which prices will be higher. However 2009-10 prices should remain well below the record levels of 2007-08. The November 2009 futures price is currently £120/tonne while May 2010 is £127.

Consumption

  • Total sales of fresh and frozen meat were down 10 per cent compared with a year earlier in the four weeks ended 22 March, although these results are likely to have been influenced by the earlier Easter in 2008.

  • Pork and poultry consumption levels appear to be holding up better than beef and lamb in the face of higher prices and the effects of the recession. This suggests there may have been some switch in consumer purchasing habits. In the 12 weeks to 22 March, retail pork purchases were one per cent higher than a year before while expenditure was up 10 per cent as a result of a nine per cent increase in average retail prices.

  • The slight increase in the volume of pork purchases in the 12-week period was due to a nine per cent increase in shoulder roasting joints - the effect of the Jamie Oliver programme – and an 11 per cent increase in pork steaks.

  • Bacon purchases were down one per cent compared with a year earlier, although higher prices meant that retail expenditure was 10 per cent higher.

April 2009