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United Kingdom Pig Meat Market Update - March 2010

by 5m Editor
19 March 2010, at 12:00am

James Park, 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

The DAPP increased to 141 p per kg to week ended 13 February, a three pence rise since the start of the year. Producer prices are three per cent higher than they were a year ago. However, despite increasing prices, this margin is reducing as a result of larger increases experience in the first quarter of 2008.

Average carcase weights remained just above 79kg in the first two weeks of February, almost 2kg heavier than year earlier values and one kilo heavier than the 2009 average. Probe values reduced to below 11mm at the end of January but have since increased marginally to just over 11mm in mid-February, indicating that heavier carcass weights are not having an adverse affect on producing lean pigs.

The 30kg GB weaner price increased to £50 per head in week ending 20 February, £3 higher than the start of the year and achieving eight per cent higher returns than February last year. Buyers in February were still trying to attract higher volumes of target spec weaners to the market by offering higher prices.

The sow price in February increased to 94p per kg, two per cent higher than at the start of the year but still 18 per cent lower than year earlier quotations. A recent upturn in the German market has been a factor in the increase in the sow price.

Exchange Rates and EU Prices

During the first six weeks of the year the Euro depreciated, resulting in the appreciation of both sterling and the US dollar by four and seven per cent, respectively. Current market forces, in particular challenges with regard to Greece's government debt, resulted in a short-term strengthening of the US dollar.

The EU pig reference price increased by over one per cent to €134 per 100kg dw in week ended 14 February, one per cent higher than the corresponding week a year ago and has increased by three per cent in the four weeks 14 February. However, any increase in terms of Euro values has been offset by the exchange rate.

Producer prices in the major pig producing member states increased in week ended 14 February. Belgium (+4 per cent), the Netherlands (+3 per cent), Spain (+3 per cent), Denmark (+2 per cent) and Germany (+2 per cent) all recorded improvements in prices quoted, influencing the overall EU average. Other EU countries recorded lower increases and some recorded a reduction in prices. However, those countries that reported a decline in pig prices were marginal and no member state quoted below a one per cent reduction.

UK Slaughterings and Production

Clean pig slaughtering in the UK totalled 9.30 million in 2009, an increase of one per cent compared with year earlier volumes. There was a distinct change between the first and second half of the year. During the first six months of 2009, slaughterings were three per cent lower than year-earlier volumes but throughput increased to over six per cent higher than year earlier volumes during the second half of the year.

The UK average carcasse weight in 2009 increased to 78kg, 1.4kg heavier than the average for 2008. This assisted an increase in sow productivity achieved during 2009 with UK sows producing on average 1.6 tonnes of pig meat, five per cent more than in 2008.

UK clean pig slaughterings in January totalled 907,000 head, 11 per cent more than the corresponding month a year ago. This is despite adverse weather conditions during the first three weeks of the year affecting transport links. Productivity and mortality rates are reported to have been affected during early January and this may have a knock-on effect later in the year.

Throughputs in England and Wales increased in the first month of 2010 by 13 per cent year on year to 716,000 head. Northern Irish slaughterings increased by 12 per cent to 138,000 head but Scottish slaughterings declined by 12 per cent year-on-year to 52,000 head in January.

Pig meat production increased in January by 14 per cent to 74,000 tonnes. The production of pig meat offal also increased – by 14 per cent to 2,200 tonnes.

Feed Prices

Following a decline in grain prices in mid-January, as a result of unexpected large increases in the USDA crop forecasts, the market has become dormant again with exchange rates dominating any fluctuation in prices rather than fundamental market indicators.

Nearby LlFFE wheat quotations were down to £96 per tonne in the week ending 11 February with November 2010 contracts being revised downwards and quoted just below £103 per tonne.

The Northern Hemisphere crop is currently in or preparing to come out of dormancy and, as a result, news on crop condition and estimates of crop size are very limited. More news will be available, and the market will start to react to this news, over the coming months. This lack of fundamental news is one reason why markets are being affected by currency movements.

UK soya prices, however, jumped to £345 per tonne on 12 February 2010, eight per cent higher than the start of the year and four per cent higher than the corresponding period last year.

As a result of relative inactivity within the grain markets, EU pig producers are benefitting from low feed prices for the second consecutive season. Despite this, they continue to suffer from poor profitability associated with the weak finished pig market.

Consumption

Data from Kantar Worldpanel (formerly TNS) indicates that the consumer trend for increased purchases of pork has continued into January. Quantities of pork purchased were up four per cent in the four weeks ending 24 January 2010, mainly driven by purchases of pork belly.

Beef purchases increased by eight per cent in January compared to year-earlier volumes, which improved the 52-week period data for beef sales. Lamb purchases were nine per cent lower in January than year earlier due to higher prices and a limited supply on the shelves. The consumer market for poultry continues to recover and moved forward in terms of purchases, expenditure and price during January.

Other News

Record German Meat Production - Commercial meat production in Germany rose to 7.74 million tonnes in 2009, according to provisional data recently released by the German statistical office.

Some 1.5 million more pigs were slaughtered in 2009 than in 2008 and, together with higher carcass weights, this resulted in a three per cent rise in pig meat production to 5.25 million tonnes. The increase in slaughterings last year was in part due to a rise in imports of live slaughter pigs.

Reduced global demand for EU pig meat - In 2009, the EU exported 2.38 million tonnes of pig meat to third countries, seven per cent less than in 2008. Exports of chilled and frozen pork, which accounted for 40 per cent of total pig meat exports, declined by 19 per cent. In particular, Danish and Dutch pork exports were down 14 and 22 per cent, respectively, to 305,000 tonnes and 92,000 tonnes. At 57,000 tonnes, Poland exported half the volume it did in 2008.

March 2010