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AHDB Pig Market Weekly


14 February 2012

AHDB UK Market Survey  - 10 February 2012AHDB UK Market Survey - 10 February 2012

The latest AHDB market intelligence forecasts indicate that beef production in 2012 will decline while sheep meat and pig meat production will increase.

AHDB

Latest red meat forecast

With imports, of beef and pig meat, expected to remain tight and another year of strong export performance the overall supply of red meat available for domestic consumption is likely to decline. Sheep meat is the only category expected to experience increased supplies due to a modest increase in imports.

With a slight increase in the breeding flock forecast and much better conditions at tupping the number of lambs available for slaughter is expected to increase by more than one per cent in 2012. With these higher numbers lamb production is forecast to be over one per cent higher than in 2011. As a result of flock rebuilding and a younger flock the number of adult sheep slaughtered in 2012 is expected to fall by four per cent with a corresponding decline in mutton production. The increased lamb production will offset lower mutton production resulting in overall sheep meat production in 2012 increasing marginally on year earlier levels.

More New Zealand product is expected to be available for import in 2012 resulting in higher import volumes overall. With increased domestic production and relatively tight supplies on the continent, and further afield, exports are also expected to increase. Supplies available for consumption are expected to increase solely as a result of increased imports of New Zealand lamb.


With fewer prime cattle available and a fall in the number of cows being culled, beef production in 2012 is expected to fall by four per cent. As supplies of dairy males will be lower than in previous years, due to high feed costs, the number of prime cattle slaughtering are expected to fall by almost two per cent. With 2011 an exceptional year for cull cow and adult bull throughputs, numbers are expected to fall by 10 per cent in 2012 curtailing the availability of manufacturing beef.

Imports of beef are expected to decline further in 2012 as tight supplies in a number of markets remain, particularly South America and Ireland. Export volumes are expected to remain at a similar level, however with production lower exports will account for an increased proportion of domestic production. With lower production, lower imports and stable exports supplies available for consumption in the UK are forecast to be lower in 2012 than they were in 2011.

Increasing sow productivity is expected to be the main driver behind a three per cent increase in the number of clean pigs slaughtered in 2012. The younger age profile of the breeding herd may result in fewer adult pig slaughterings in 2012, following a 14 per cent increase in 2011, a six per cent decline is forecast this year. The increased clean pig throughputs will more than offset the falling adult pig numbers resulting in pig meat production increasing three per cent in 2012.

Tight supplies of pig meat on the continent are expected to result in a fall in import volumes and an increase in export volumes, although economic uncertainty could influence this to some degree. These two developments are expected to offset the increase in domestic production resulting in the supplies of pig meat available or domestic consumption in the UK being lower than 2011.

Cattle market trends



Prices

In week ended 4 February beef supply continued to determine deadweight cattle prices. The overall prime cattle price increased three pence on the week to average 330.8p per kg. R4L steers and heifers were both two pence dearer on the week at 339.4p and 336.0p per kg respectively. The increasing demand for manufacturing beef contributed to a five pence increase in the -04L cow price to average 259.6p per kg. AHDB estimated slaughterings indicate that throughputs of prime cattle in the year to date are 13 per cent down on year earlier levels.

In week ended 8 February the liveweight prime cattle trade at GB auction markets also strengthened on the week. Steers averaged 187.1p per kg, up three pence, and heifers were four pence dearer at 191.1p per kg. The buoyant cull cow trade continued, driven by continued demand for quality cows from the export and the domestic market. The liveweight cull cow price strengthened four pence to average 125.2p per kg.

Hilton Beef Quota

The European Parliament’s International Trade Committee (INTA) has signed off proposals to increase the autonomous quota for high quality beef. If approved, the regulation will take effect from August 2012, allowing third countries to ship up to 48,200 tonnes of duty-free high-quality beef from animals not treated with growthpromoting hormones. The current quota of 20,000 tonnes is accessible to the US, Canada, Australia, New Zealand and Uruguay, and is consistently exhausted each year.

The EU import quota increase was agreed in bilateral conciliation talks and memoranda of understanding already concluded with the US and Canada. In exchange, the USA and Canada suspended import duties, amounting to almost $130 million, imposed on "blacklisted" EU farm produce, including pork.

Retail price spreads

During January farmgate prices for beef declined slightly while average retail prices increased. As a result the actual price spread between the producer and the retailer widened compared with the month earlier. Producers received 53 per cent of the final retail price during January, one percentage point less than in the month earlier. However, compared to the year earlier, with farmgate prices increasing to a greater extent than retail prices, the latest figure is four percentage points higher.

Sheep market trends



Prices

In week ended 4 February, the deadweight SQQ increased nearly two and a half pence on the week to average 441.1p per kg, 49 pence higher than in the corresponding week last year. The R3L price increased by a similar amount to average 443.1p per kg.

The liveweight trade remained firm in week ended 8 February, with Friday being the only day in which the SQQ averaged below 200p per kg. At 203.2p per kg the SQQ average for the week as a whole was marginally ahead of last week. Throughputs were lower on the week with reports suggesting that store lamb finishers may be anticipating higher prices in the weeks ahead. With Easter in early April it may be next month before prices increase to tempt more lambs forward.

In week ended 8 February strong demand for cull ewes led to reports of a 'flying trade'. The average price firmed to £79.70, an increase of over one pound per head on the week.

Slaughterings

AHDB estimated slaughtering in week ended 4 February were 197,000 head six per cent lower than in the previous week. In the year to date AHDB estimates that slaughterings were almost four per cent lower on the year.

Retail price spreads

As firm demand and tight supply had an impact on price the average farmgate price received by producers during January was up 13 per cent compared with January 2011 at 442.9p per kg. During the same time period the average retail price of lamb increased by 11 per cent. This resulted in the price spread between the producer and the retailer declining one percentage point on the year to 43 per cent. Consequently, producers received nearly 57 per cent of the final retail price for lamb, one percentage point more than in January 2011.

During January all cuts of lamb were more expensive than in the corresponding month last year. The price of whole leg and boneless shoulder increased to the greatest extent, up 15 and 14 per cent respectively. All other cuts increased by between six and 13 per cent on the year. With the exception of cutlet chops, the retail price of all cuts of New Zealand lamb increased between 13 and 37 per cent on the year. New Zealand cutlet chops were nine per cent cheaper year on year.

Pig market trends



Prices

In week ended 4 February, following a little movement in market conditions, the DAPP fell again on the week to 140.8p per kg. The average weight of pigs in the sample declined marginally to 79.9kg and the probe measurement reflected this, decreasing 0.1mm to average 11.1mm.

Prices have come under pressure in recent weeks; despite some promotional activity consumer demand was somewhat subdued. In addition with the relative weakness of the euro, as a result of ongoing economic problems across Europe, processors are able to source cheaper imported product which may be a factor in the weaker prices of late. Nevertheless, producers are still receiving on average five pence per kg more than at the same time last year.

European prices

Since Christmas, prices across Europe have fallen sharply. From over €160 per 100kg in week ended 18 December, the EU average price fell to below €149 in week ended 22 January 2012, before recovering slightly the following week. This fall was reportedly the result of reduced consumer demand after the holiday period, along with a slowdown in export demand once supplies for the Chinese Spring Festival had been shipped. However, tightening supplies of pigs are now beginning to push prices higher and there are reports that export demand is beginning to pick up again.

Retail price spreads

Steadily declining farmgate pig prices meant that the average price received in January at 143.5p per kg was over four pence per kg lower than in December 2011, equivalent to a fall of three per cent. Over the same period, retail pork prices also declined by four pence per kg or one per cent lower compared with the previous month to 371.2p per kg.

As a result of both the producer price falling and a lower retail price in January the proportion of the retail price received by the producer was a similar level to the month earlier at 39 per cent.

February 2012

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