August 7, 2012

 

BPEX Export Bulletin - July 2012 (Week 30)

Brazil's poor exports and weak domestic demand have dampened pork prices despite government injection of credit. Pig farms have closed down and others are on the verge of bankruptcy.

 

Pork export news this week

 

A special 'Happy Birthday' to PIC which celebrates this year its 50th anniversary.  The company traces back its humble beginnings to 1962 when a group of pig producers met to improve their genetic base in Fyfield, Oxfordshire. This meeting proved most successful and PIC is now present in 30 countries and a leader in the sector.

  

  

Brazil

 

The Brazilian revolution does not benefit the pork market

 

The Brazilian income revolution is staggering. There are now 150,000 millionaires and 24 billionaires in Brazil. Since 2005, the middle class (C) has increased from 34 to 54%, the higher class (A-B) from 15 to 22% and the lower class (D-E) has fallen from 51 to 26%. In 2011 alone, some 2.7 million people have moved from the lower to middle class. Beef consumption is expected to rise by 3% to 33 kg per capita and chicken by 4% to 49.2 kg in 2012, according to Informa Economics. This means a hefty total of 97.5 kg. However, pork is not increasing in popularity and languishes at less than 15 kg per head. (Source: Rio Times BNP-Ipsos, various).

 

Weak pork sector

 

Poor exports and weak domestic demand have dampened pork prices now around R$1.75/kg live weight (£0.55/kg) as costs of production remain around R$2.25/kg (£0.71/kg). Despite government injection of credit, pig farms have closed down and others are on the verge of bankruptcy. A Russian veterinary inspection is expected to visit the three states with a current embargo Mato Grosso, Paraná and Rio Grande do Sul. These states have been the hardest hit by the crisis. (Source: Brazilian Meat Monitor)

 

Pif Paf Alimentos ambitions

 

The pork and poultry processor from Minas Gerais wants to challenge the domination of Brazil Food (BRF), Marfrig and JBS. The company now has a turnover of £315 million and plans to reach size of Aurora, the fourth largest player for pork and poultry. Although the company has missed out on its bid to acquire units from BRF following the recent antitrust ruling, it is planning to raise capital and expand fast. (Source: Brazilian Meat Monitor)

 

 

Denmark

 

Market

 

On the European market fresh legs, shoulders and production meat are sold at by and large unchanged prices. The demand for loins, collars and tenderloin for the European markets is fine. The situation on the British bacon market is stable. As to markets outside of Europe, there are fine orders to Russia while exports to China have slowed down, due to large amounts of domestic slaughtering. Exports to Japan remain stable. (Sources: Danish Crown, Tican, Danish Food Council).

 

Pig production not profitable

 

Even if a pig quote of €1.506 plus residual payment may seem high the economy of pig production is undermined by high feed prices. Neither the German nor the Danish quote offers a profitable economy in pig production, evaluates John Jensen of Agro Markets. He also evaluates it to be likely that feed prices will maintain the high level over the next years. The sluggishness in pig production means that production adjustment will take place with some delay and there will be periods of bad economy until the adjustment is complete. According to Jensen, exports of piglets will not constitute any rescue for sow farmers, as "the Germans are not going to buy piglets when there are no prospects of any improvements of the quote, and when they have the same high feed prices as in Denmark". He advises that pig farmers should aim to be self-sufficient in grain and guard against high soy prices by combining the purchase of soy with the sale of home-grown canola. There is a reasonable correlation between the prices of soybean and canola, which can serve as a form of hedging, explains John Jensen. (Source: Landbrugsavisen).

 

Japanese opportunities

 

The EU is currently negotiating a free trade agreement with Japan, and it may be a golden opportunity for the Danish slaughterhouses. As the Japanese import system functions today, a so-called differential tariff is imposed on items priced below a certain level, which means that the Danish slaughterhouses have been able to export only the more expensive cuts. An FTA will open up opportunities to export the slightly cheaper cuts too, like shoulders for the manufacture of high quality sausages, assesses international manager of Danish Food Council, Knud Buhl. Buhl believes that the fact that Denmark already holds a respectable position in the Japanese market will be a distinct advantage, but he dare not promise that it will create a lot of extra work at the Danish slaughterhouses. It offers a better chance of holding on to the quantities exported today, he evaluates. (Source: Borsen)

 

Danish Slaughterhouses - payments week commencing 23 July 2012
Slaughterhouse	Danish Crown	Tican
Slaughter pigs (70.0 – 86.9 kg)	Euro 1.506	Euro 1.506
Difference to last week	Unchanged	Unchanged
Sows (Above 129.9 kg)	Euro 1.010	Euro 1.010
Difference to last week	0.04	0.04
Boars (Above 109.9 kg)	Euro 0.840	Euro 0.840
Difference to last week	0.04	0.04

          

             

France

 

Gene+ increases its market share

 

The French breeder sold 150,000 breeding pigs and 1,038,000 doses of semen in 2011, giving a market share of 19% (+1.5%) in France, still some way behind Nucleus. Gene+ has an export contract of 3,800 sows with Harim of Korea and collaborates with ADN and I-Tek in China. (Source: Porc Magazine)

 

Sexual smell

 

Boar taint or "odeurs sexuelles" in French, is the subject of two research programmes, one funded  by Inaporc and the second one as part of Valorial competitive pole. CRP Bretagne (The Regional Pig Committee in Brittany) and SNIV-SNCP (Pig processors federation) have asked their members to be very vigilant on the issue and they have specifically asked their members to take no initiative without having set up a reliable industrial method of detection of boar taint on entire male carcasses on the killing line. Any risk taken with the sale of smelly carcasses would have a highly detrimental effect on the image and the consumption of pork and would have a very negative impact on the whole French pig meat industry. The two organisations are also insisting on the economic consequences of these measures: devalued and consigned carcasses in particular. In one country of northern Europe some customers prefer getting pig meat exclusively from females.

 

Animal welfare in French abattoirs

 

In order to comply with the European rules CE N°1099-2009 on animal welfare in abattoirs and applicable from 1st January 2013, a guide of good practice in pig abattoirs has just been passed to French Ministry of Agriculture (DGAL) to be approved by ANSES, the French food safety Agency.

 

Pigs

 

The French market should remain divided between the lack of offers in breeding and the low demand due to prices that are not going up. Buyers are again hesitating to maintain pressure on their purchase prices or pay a higher price to boost the activity. The weather has improved and this is good for the cuts market.

 

Cuts

 

According to the latest data of the American Federation of Meat Exporters, The United States continues to see their exports progressing. For the last five months, 780, 589 tons of meats were exported, that is 11% more than in 2011. If sales have increased to Mexico (+18 % / 182, 350 tonnes) and to China (+120% / 102, 404 tons), they have slowed down to Japan (- 7 % / 188, 798 tonnes).

            

Pork prices RUNGIS week commencing 23 July 2012
Cut name	Price range (Euro/Kg)
Back fat, rind-on	0,65
Trimmings	1,65
Leg	2,19
Loin including chump	3,04
Loin excluding chump	2,60
Belly extra without trimmings	2,73

Germany

 

Market

 

Better weather conditions have led to sales of barbecue products having increased. Summer holidays however still impact on the trade. Available products are mostly sold without difficulties with bellies and collars being the main products sold.  Availability of sow meat is rather limited. (Source: AMI)

 

Vogler invests

                                

Vogler Fleisch has announced an investment of €12 million in its three production sites. Works are planned to be completed by August 2013.  Besides an increase of capacity and competitiveness, focus is set on animal welfare requirements as well as requirements for organic certification to be complied with. Vogler Fleisch ranks among the Top five German abattoirs with a market share of 3,3% and slaughter numbers having reached 1,94 million pigs in 2011. (Source: ISN, topagrar)

 

Pork prices Hamburg Market Week commencing 23 July 2012
Cut name	Price range (Euro/Kg)
Round cut leg	2,10/2,25
Leg (boneless, rindless max fat level 3mm	2,90/3,10
Boneless Shoulder	2,30/2,45
Picnic Shoulder	1,95/2,10
Collar	2,55/2,70
Belly (bone in, ex-breast)	2,15/2,30
Sheet Boned Belly (rindless)	2,05/2,30
Jowl	1,30/1,40
Half Pig Carcasses U class.	2,02/2,12

                

             

Netherlands

 

Higher margins for breeders

 

Breeders' gross margin has risen sharply from €400 per sow in 2011 to €800 in 2012, reflecting higher weaner prices. However, these prices have recently fallen. Gross margins for slaughter pigs have declined slightly. (Source: Boerderij Vandaag from Farm Advies data)

 

PIC increases semen sales

 

Following the takeover by Elite group of PIC NL in 2011, the breeder has increased its semen sales to 420,000 doses, up 20% on the last financial year. Gilt sales remain flat with 25,000 animal sold. (Source: Boerderij Vandaag)

 

 

Russia

 

ASF

 

Tverskaya oblast authorities have begun to pay compensation for pigs slaughtered in the process of fighting ASF. As of July 19, the amount paid as compensation was RUR1,626,114 (US$49,635).  Currently, 18 regions of the oblast are under quarantine.  If the spread of ASF cannot be stopped, the whole oblast will become quarantine territory for two years. This would mean the prohibition of imports and exports of all animals, the production and export of products of animal origin, exports of products of vegetable origin as well as the trade with animals and products of animal origin on the markets of the territory and agricultural fairs. (Source: IA Kazakh-Zerno)

 

Launch

 

RusCom Group has launched a new pig breeding and pork production complex in Kormilovskiy region of Omskaya oblast. The total production capacity of the complex is 110,000 pigs or 9,000 tonnes of pork annually. The complex's assets include fields of a total area of 9,000 hectares, where the company grows grains and feed crops for their pigs, a feed mill and an elevator of 30,000 tonnes storage capacity. (Source: Meatinfo.ru)

 

Market

 

Imported Pork Moscow Market (July 24)

 

Neck (no bone): US$6.50/kg

Leg (no bone): US$5.40/kg

Heart: US$2.77/kg

 

Imported Pork St.Petersburg Market (July 24)

 

Loin (with bone): US$5.10/kg

Shoulder (no bone): US$5.20/kg

Heart: US$2.60/kg (Source: Meatinfo.ru)

 

 

Spain

 

Evolution of the Spanish pork market

 

Despite the economic crisis the overall meat consumption remains healthy with a rise of 1.6% for fresh meat and 3.8% for processed meat, making a total of 2.3% in the first three months of this year. Sales of fresh pork are slightly down by 1.2%. However, these figures hide a rapidly changing market.

 

The average cost of pork at retail has been hit by deflation of about 5.3% according to Government statistics. Prices are now very keen to entice hard-pressed Spanish consumer to continue buying pork. For instance, Madrid retailer Hiper Usera proposes ribs at €4.60/kg, riblets at €3.95/kg; pre-packed pork chops in Mercadona now retail at €4.45/kg.

 

However, the type of cut is changing. Hiper Usera which operates only 50 supermarkets and cash and carry stores in Madrid now sells 20 tonnes of diced pig ears in one kilo blocks per week. Pig bones are increasingly sold in supermarkets, so are back fat products sometimes covered with seasonings and cooked masks.

 

The example of El Cortes Inglés is striking. The chain upmarket department stores, hyper- (Hipercor) and supermarkets (Supercor) was the main loser of the Spanish retail war with crumbling market share. This year, it has changed its positioning radically with a price offensive on 500 products. Gone is most the premium offer with cheaper meat products and cuts now pushed forward.

 

The rise of processed meat sales is also deceptive as this covers a switch to cheaper lines. Pre-sliced ham-looking products labelled "York" contains only 45-65% pork and are made with lean pork, not from legs, are the cheapest and best sellers in the processed pork category. However, they are outsold by even cheaper turkey products. Jamón cocido extra (cooked ham) is present on the shelves but do not sell as well. Sliced dry-cured ham is heavily promoted and is one of the most embattled markets.

 

Surprisingly for Spain, sales of frozen meat are increasing fast (+8.3%) but again, buyers are tempted by low prices with the average price down nearly 15%.

 

With difficult prospects for Spain for the next two to three years, it is likely that these trends will continue and strengthen: overall healthy consumption yes, but of cheaper products. What does it mean for UK exporters and processors? With Spain, the second largest producer and consumer of pork in Europe, this has some important implications. It means more cheap Spanish loins on the European market but less pork available for the China.

       

Pork prices Barcelona Market Week commencing 23 July 2012
Cut Name	Price range (Euro/Kg)
Gerona Loin Chops	--/--
Loin Eye Muscle	3,56/3,59
Spare Ribs	2,93/2,96
Fillets	--/--
Round Cut Legs	--/--
Cooked Ham	2,21/2,24
Rindless Picnic Shoulder	1,66/1,69
Belly	2,20/2,23
Smoked Belly with Spare Rib Section Cut off	2,63/2,66
Shoulder chap or Head Jowls	1,23/1,26
Back Fat, Rindless	1,08/1,11

             

            

Ukraine

 

Brazilian competition

 

According to data provided by the Brazilian Pigs and Exports Association (ABIPECS), Brazil has exported a record volume of more than 64,700 tonnes of pig meat to Ukraine during the first five months of the year. Compared with the previous year this is an increase of 263% and has put Ukraine first on the list of most important importer of Brazilian pig meat before Hongkong and Russia. Following bans on export markets such as Russia or Argentina, Brazil established new opportunities for exports. In July, the Ukrainian veterinary authorities approved two further Brazilian producers for exports which causes strong concerns among domestic producers who fear large quantities of cheap pig meat products coming onto the market. (Source: topagrar)

 

Pig numbers down

 

As of June 30, 2012, the number of pigs in all kinds of farms and households in Ukraine was 7,847,700 which is a decrease of 2.6% compared to June 30, 2011 figures. 3,437,400 pigs (43.8%) are kept in private households, 4,410,300 pigs (56.2%) are kept in agricultural enterprises. (Source: pigUa.info)

   

  
US$1 = EUR0.81 (August 7, 2012)