Prices and Supplies
Farmgate pig prices edged forward for most of July and peaked at 150.6p/kg in the week to 21 July.
They then eased back for two weeks, in line with their seasonal trend, before rising marginally in the second week of August.
Compared to last year, the DAPP is now slightly higher; though it traded at a discount between 26 May and 4 August.
UK prime pig slaughterings growth slowed substantially during June as just 0.2% more prime pigs were killed than a year earlier.
However, heavier carcase weights and an increased sow kill helped raise overall pigmeat production by nearly 2%.
During the first half of the year, throughputs rose 3% and total production volumes were up by 3.5% when compared with H1 2011.
This may help explain why market prices have struggled to reach last year’s levels.
In Scotland, June throughputs were 7.5% higher than a year before and H1 figures were up by 7%.
The addition of a processing plant last September has made a significant contribution to this increase.
Kantar data shows that consumption of pork in the UK declined by 2% in the three months to July 8.
Similar to beef, consumption volumes have decreased primarily due to higher retail prices (+4%) as spending on pork in cash terms has risen.
Volume figures in the four weeks to July 8 were even weaker with consumption down 7%.
Sausage sales were 2% lower as the negative effect of bad weather on barbecue products offset their strong appeal amid difficult economic conditions.
Weaner values have now fallen each week for four months. In the week ended 11 August they traded at £39 a head, compared with £46 a head in mid-April.
It is likely that falling prices are reflecting the decreased confidence that has come as a result of the combination of sharply higher feeding costs and expectations that prices for finished pigs will ease seasonally.
Prices for feed grains and soybeans have stabilised in August having spiked in the first half of July.
The spike was induced by an extreme drought in the US which has led to large downwards crop revisions, adding to the supply side pressures previously factored into forecasts from the Black Sea region and South America.
Any concerns over the prospects for demand, given the weakness in global economic activity, have clearly been outweighed by supply-side worries.
As feeding costs were falling sharply at this time last year, prices have moved further ahead of year earlier levels, and, when coupled with similar prices at the farm gate, margins have continued to narrow.
A sow price sensitive to the export trade has struggled since late spring.
In addition to exchange rate movements, which have seen Sterling strengthen 10% over the past year, and by 5% since the end of March, prices have faced headwinds from weaker demand in the EU due to unseasonably wet weather and increased supplies as some producers on the co
ntinent liquidate their herds ahead of the sow stall ban.
In the opening two weeks of August, sow pr ices slipped below 106p/kg dwt, to trade at an eleven-month low.
Average producer price for grade E pigs in the EU increased by 4.5% between mid-July and mid-August; rising from €1.68/kg to €1.755/kg.
UK price competitiveness improved considerably over this period as British prices rose only a fraction in Euro terms.
A stable exchange rate subsequently helped improve the competitive position of domestic pigmeat on the home market.
In the first five months of 2012 pork export volumes have been 4.5% higher than in the same period of 2011.
However, during May, monthly volumes were at their lowest of the year so far at 11,000t, falling 4% short of year earlier levels.
Pork imports remained well below last year’s levels into May with monthly volumes down 14% year-on-year.
In the January-to-May period they were down by 11%.
Imports have fallen due to the combination of increased domestic production and a slowdown in demand.
News Round up
Latest census figures for Denmark revealed that its total pig population fell in size during the year to July.
While overall pig numbers fell 1% to 12.47m head, the sow herd declined by 2% to 1.26m head.
The implication of the total number of pigs falling by a lower proportion than the breeding herd is that productivity improved.
In fact this data underestimates the improvement in productivity since overall numbers have been pushed down by greater exports of weaners; principally to Germany and Poland.
Weaner exports ran 15% ahead of last year in the January to May period.
Meanwhile, the Danish Food and Agriculture Minister has warned that animal welfare regulations could be strengthened unless producers make improvements to current practices.
This came after the publishing of a report from the Danish Pig Research Centre which revealed that more than 200 of the pig farms inspected during 2011 (out of 402) had breached legislation.
It also reported that 144 producers had been criminally charged as a result. Though only a very small proportion of the country’s pig herd were affected, the Minister underlined that all pigs should be treated well.
Some positives were contained within the report, however, as sow mortality fell 1.5 percentage points to 13.7% over a three-year period, while piglet mortality also declined, and one-fifth less antibiotics were used than in 2010.
The combination of weak producer prices and rising feed costs has begun to bite in Brazil.
The cost of production is estimated to have risen by around 40% this year and this has reportedly turned many pig farms into loss making enterprises.
In the country’s leading pig producing region, Santa Catarina state, the cost of production is estimated to have risen to around 80p/kg while farmgate prices are trading below 50p/kg lwt.
Producer prices have been kept low by falling demand in the domestic marketplace as pork has had to compete against falling beef and chicken prices, while exports have been held down by restrictions in Russia and a slowdown in overseas demand.
In response, the Brazilian government has granted £63m worth of low-interest rate loans to pig farmers and has placed a minimum price on live pigs equal to 73p/kg.
The one area of hope for the Brazilian pig sector is the 20% depreciation in the value of its currency which has taken place over the past year.
It has increased the competitiveness of Brazilian pigmeat in the global marketplace.
An outbreak of African Swine Fever (ASF) has been reported on a Ukrainian pig unit.
The small farm, in the country’s Zaporozhye region, lost five pigs to the virus as three died and a further two were culled.
As a consequence, quarantine has been set up around the farm.
The disease has been highly prevalent in neighbouring Russia in recent years and the implication is that the disease has been carried across the border.
In June the FAO warned that informal trade could lead to the virus being carried across the border, potentially through a contaminated piece of pork or bacon in a sandwich.
Wild Boar is also seen as a potential carrier of ASF, and this led the Ukrainian government to implement a mass cull earlier in the summer.
In response to the outbreak Germany’s Agriculture Ministry has issued a request that its citizens do not bring any pork products into the country from either Russia or the Ukraine.
Despite Taiwan lifting an import ban on beef from US cattle raised using the feed additive, ractopamine, as long as the residues are below a certain threshold, it has still kept in place a ruling that prevents meat from pigs that have had ractopamine added to their diet from being shipped in from the USA.
The reason given is that pork is consumed in much greater volumes than beef and is therefore a greater public health issue.
Iowa State University estimates that an end to the ban on US pigmeat containing ractopamine residues could be worth as much as $417m (£270m) annually to the US pig sector in ten years’ time.
This is eight times the value of shipments during 2011.
Prepared by Iain Macdonald and Stuart Ashworth