September 3, 2012
BPEX Export Bulletin - August 2012 (Week 35)
This week's export news
US producers are facing a "tsunami of red ink" and record losses. Other major pork producers such as Brazil and Vietnam are facing major losses due to high feed prices. Rabobank is predicting a stabilisation of world prices in the autumn at the current levels but a reduction of production in 2013 and higher prices. See below articles.
Belgium
Delhaize bans castration
The major retailer will only sell pork from entire pigs from 1 June 2013. (Source: Vlees Magazine)
Brazil
Meat Sector downgraded
Fitch and Moody have downgraded the three largest Brazilian meat processors JBS, BRF and Marfrig in response to spiralling world feed prices and lack of liquidity. (Source: Asian Agribusiness)
Contrasting economy
The Brazilian economy is slowing down fast with 1.8% growth predicted this year on the back of lower commodity prices. The bright spot is soya exports due to increase to a record 37.5 million tonnes this year worth £19 billion in 2013. Corn exports are up 111% this year with China again the main trading partner on a record harvest of 76 million tonnes. Cane sugar harvest is also near its all-time high of 560 million tonnes for Centre-South. Beef which is mainly grass fed is faring well but the crisis is expected to intensify for the pork and poultry sectors. (Source: Reuters, various)
Competing proteins
The fall of price of beef and chicken - always preferred to pork when prices are competitive- has been one deciding factor in the current crisis. Low demand and poor exports explain the build up of frozen stocks and the low prices. Despite the opening of the US and Chinese markets, Brazilian exporters have not been successful in expanding their sales. Furthermore, as most of them also produce and process chicken at a loss, they are reluctant to increase their exposure with loss-making pork. In balance, a reduction of production is unavoidable. The three largest poultry producers have already announced a coordinated cut of production. (Source: Agra Europe, various)
Lower taxes for pork
In addition to the existing subsidy programme, the government has announced a reduction of taxes affecting pork until 31 December 2014. (Source: Brazilian Meat)
China
Intervention buying
The Chinese Government has resumed its purchases of frozen pork to stem the fall of pork prices. Wholesale prices have fallen 19% so far this year to around €2.53/kg. Pig prices have fallen in response to increase supplies of 5.9% in the first half of the year. Fears of major losses due to disease have not materialised. Rabobank in its latest market update believes that prices will start rise in China in the autumn (Source: Agra Europe, Boerderij Vandaag).
Siberian pork for China
Siberia is already a large exporter of grain to China. Now, the company Basic Element, which owns major aluminium producer Rusal, plans to export 15,000 tonnes of pork to China. It also plans to increase its grain trade to 500,000 tonnes this year to 1.6 million tonnes by 2016. (Source: Asian Pork)
Volatility of pork prices
That the Consumer Price Index (CPI) shows a major correlation with the variation of pork prices is well known. In practice, pork prices weigh 40% in the determination of the CPI. With pork accounting for 63% of Chinese meat consumption and Chinese consumers not willing to switch to poultry unless under extreme conditions demand, demonstrates a low price elasticity. Supply, on the other hand remains disrupted and unpredictable due to the high fragmentation of the market, the influence of disease and low replenishment. This creates a high level of volatility, aggravated by some speculation from intermediaries and the short life cycle of the product. (Source: Asian Pork).
Vulnerability to high feed prices
In a review article of the Chinese pork sector Dr Hans-Willhem Windhorst of Vechta University points out to the increasing vulnerability of the industry to high feed price. In addition, with China importing 70% of the world soy, this demand is keeping prices to a high level. He also quotes of course the major issues of animal health, pork safety and lack of young, qualified manpower. (Source: Fleischwirtschaft)
Cyprus
Cutbacks of production
The rise of feed prices is affecting Greece and Cyprus as in other EU countries with the difference that feed prices were already slightly higher. The gap is filled by increased EU imports. (Source: own)
Denmark
Market
The European markets for fresh meat continue the positive development. Prices of legs, front parts, shoulders and loins are increasing. It is evaluated that the retail sector will have difficulties in raising the prices without getting an adverse reaction from customers. On the British bacon market backs are sold at increasing prices, and sales are satisfactory. On third country markets the demand remains unchanged, with fine activities to Japan, China and Russia. (Sources: Danish Crown, Tican, Danish Food Council).
Organic production advantageous
In recent years it has been more profitable to be an organic farmer than a conventional one, according to the new model calculations presented in the booklet Production economy Pigs 2012 from the Pig Research Centre (VSP) and the Center for Agriculture. From June 2004 to March 2012 organic sows with piglets up to 30kg on average earned €200 annually per sow, while an equivalent conventional producer over the same period had a negative result of minus €150 Euros. A similar picture emerges for finisher manufacturers, where organic producers on average earned €13 per finisher, and the conventional went to around zero with an average result of minus €0.67 per pig. (Source: Landbrugsavisen)
Tican production down
The decline in production at the Tican slaughterhouse at Thisted results in employees being dismissed. CEO Ove Thejls explains the decline by shortage of porkers in all Denmark and by the fact that the total quantity has been decreasing from 2011 to 2012. The decline in supply of pigs is between five and ten percent, meaning that there are fewer pigs contributing to pay the fixed costs. The decline means a decrease of approximately 3 cent in profit per kg. Now the slaughterhouse has a production of approximately 35,000 pigs per week. (Source: Nordjyske).
|
Danish Slaughterhouses - payments week commencing 27 August 2012 | ||
|
Slaughterhouse |
Danish Crown |
Tican |
|
Slaughter pigs (70.0 – 86.9 kg) |
Euro 1.600 |
Euro 1.600 |
|
Difference to last week |
0.04 |
0.04 |
|
Sows (Above 129.9 kg) |
Euro 1.171 |
Euro 1.171 |
|
Difference to last week |
0.04 |
0.04 |
|
Sows (Above 129.9 kg) |
Euro 0.1001 |
Euro 1.001 |
|
Difference to last week |
0.04 |
0.04 |
France
Reducing antibiotics
In November 2011, the French government published the national plan to reduce the risk of resistance to antibiotics in animal health. The objective is qualitative (maintain therapeutic tools) and quantitative (reduce antibiotics intake by 25%). The best way of achieving these objectives is to have animals in good health by improving practices. One pig farmer reduced by 5 fold antibiotics intake in his herd by emptying the slurry pit more often and by improving the atmosphere in the building. Now, according to specialists at Toulouse veterinary school, one of the main causes of maintaining resistance to antibiotics is the spreading of slurry when particles are sometimes carried long distances by air and vets suggest the burying of slurry before techniques are developed to destroy antibiotics in slurry. The French government is also looking for alternatives to antibiotics such as plant extracts, essential oils, pre and probiotics, enzymes, acidifiers etc.
Pigs
Prices continue to progress all over Europe. The German reference price continues its progress and recorded +7 cents last week, the increase was +5 cents in Belgium and +2,5 cents in Spain. All prices in Europe reach their record levels of 2008. This tendency is due to a very low offer. According to the German statistical services, the slaughtering of pigs slowed down by 1,1% during the first 6 months of the year compared to 2011. It is the first time since 2005. At the same time, consumption remains dynamic. The EU exports remain good in particular for Spain +23%.
Piglets
The progress of the prices last week is still present in Denmark, in Netherlands, in Spain and in Belgium.
|
Pork prices Rungis - Week commencing 27 August 2012 | |
|
Cut name |
Price range (Euro/Kg) |
|
Back fat, rind-on |
0,75 |
|
Trimmings |
1,70 |
|
Leg |
2,47 |
|
Loin including chump |
3,22 |
|
Loin excluding chump |
2,75 |
|
Belly extra without trimmings |
2,95 |
Finland
Farmers in Finland get higher prices
The slaughterhouse companies Atria and HK Scan have announced that they are prepared to raise prices for their Finnish suppliers after the Finnish pig producers' association Suomen Sikayrittäjät has threatened to boycott the big slaughterhouses. Members of the pig producers' association account for 60% of the pig production in Finland. There is no information on when or how much the settling prices will be raised. Competitor Snellman however will increase prices on 1 September by 10 cents/kg. The company considers it necessary to maintain the domestic pig meat production in Finland in the future. CEO Henrik Snellman, states that the company is prepared to raise the price further should others follow. However, Snellman will not promise to pay more than the other slaughterhouse companies for more than one year. (Source: Landbrugsavisen).
Germany
Market
The price rally on the European markets for slaughter pigs continues with most countries reporting limited supply meeting strong demand. The most significant price increase of +7 Eurocents was reported from Germany, The Netherlands and Austria. In Germany, this price level was last reached in 2001. Tönnies reacted by changing payment procedures with the company's site in Rheda-Wiedenbrück giving producers the choice between payments based on either the FOM or Auto-FOM system. Austria reports the complete lack of available pigs and The Netherlands were forced to follow the German price increase in order to avoid all pigs being sold to the neighbouring country. Danish prices now lag 10 Eurocents behind the German quote however concerns are that the reluctance to follow the prices might threaten the high price levels in the other countries since Denmark is the second largest pig meat exporter within the EU after Germany. On the German market, there is still strong demand from the slaughterhouses. Also exports of live pigs to Poland, a satisfying third country trade and increased demand on the domestic market at the end of the holiday season support the upwards trend. For the next weeks, prices are expected to remain stable. In Hamburg, the latest increase in prices seems to have been widely accepted but resistance against further increases is getting stronger with orders already being reduced. Large investments are avoided though all cuts are currently still sold without major problems. There is strong demand for sow meat the prices for which keep following the pig prices on their upwards trend with active demand and limited supply supporting this development for the time being. (Source: AMI, ISN, various)
Danish Crown expands in Oldenburg
The abattoir in Lower Saxony, the fourth largest in Germany, slaughters some 64,000 pigs per week, worth €540million per year with 1,300 staff. For memory, the complex was bought in January 2011. Pigs are purchased from cooperatives through a system of brokerage. The company started with a ratio home market-export of 70-30; it is now 55-45 with Korea, Russia and China the main targets. For the EU, it aims to reinforce its position on the British bacon market and in Italy for dry-cured ham. It is run as a German business rather independently from the main Danish business with Steen Sönnichen, 44, as Managing Director. (Source: Eurocarni)
|
Pork prices Hamburg Market Week commencing 27 August 2012 | |
|
Cut name |
Price range (Euro/Kg) |
|
Round cut leg |
2,40/2,60 |
|
Leg (boneless, rindless max fat level 3mm |
3,30/3,45 |
|
Boneless Shoulder |
2,85/2,95 |
|
Picnic Shoulder |
2,30/2,50 |
|
Collar |
2,95/3,15 |
|
Belly (bone in, ex-breast) |
2,65/2,75 |
|
Sheet Boned Belly (rindless) |
2,50/2,70 |
|
Jowl |
1,65/1,80 |
|
Half Pig Carcasses U class. |
2,30/2,40 |
India
Growth of meat sector
India's meat sector is growing fast. According to statistics published in Times of India the country produces an estimated 6.27 million tonnes. Buffalo meat represents about 23.3%, beef 17.3%, sheep meat 4.6%, goat meat 9.4%, pork 5.3%, poultry 36.7% and other species 3.4%. Meat is fashionable and increasingly present on restaurants' menus, particularly in the larger cities. Rabobank plans growth in the poultry sector of 8-10% per year and an increase of poultry processing capacity of 50% over the next two years. (Source: various)
Italy
Prices up at last
After four torrid years for Italian pig producers, pork prices are now rising strongly and reach a record €207.7/kg. This means an increase of 22% in three months. Of course, then hope is that prices will remain at this very high level for some time and that they will be able to rebuild their cash flow. (Source: own)
Jamaica
High taxes
Pork has been hit by a General Consumption Tax on pig feed and retail price of 16.5%, meaning an increase of retail price of 25%. The US$2.3 million Sweet River abattoir project vital to the sector has been cancelled and the industry and its 500 pork producers face uncertainty. The sour point is that chicken is exempt of the new tax. (Source: Fleischwirtschaft International)
Malaysia
Tip Top clear market leader
Tip Top is the first modern private pig abattoir in Malaysia. The company now slaughters 17,500 pigs per week, with a large proportion under contract. However, it is still competing with illegal slaughtering, which supply wet markets. The country also counts a number of state-owned abattoirs. (Source: Asian Pork)
Netherlands
Market tightening
The current price rise in Holland reflects a tightening of the European market and is set to continue. During August, weekly kill fell to 247,000 heads. In a report, Rabobank reports a change of European outlook with less pork produced in Northern Europe but more in Spain and Italy (respectively +6.8 and +6.2%) (Source: Boerderij Vandaag).
Portugal
Grazicar steady growth
In a very difficult situation for the Portuguese meat sector plagued with low prices and high costs, Grazicar, the pork plant from Cadaval near Lisbon is showing steady growth. Although, the plant only slaughters 2,000 pigs per week, the company has a high reputation for quality. It sources 40% of the output from its own farms, the other 60% under certified controlled production, and employs 50 staff for a turnover of €13 million. (Source: La Carne)
Russia
Bans on Russian and Ukrainian pork
Germany has banned the import of pork products from Russia and Ukraine because of the continuing ASF epidemics in those countries. The official report of the Germany veterinary authority states, "The Ministry of Agriculture warns our citizens entering into Germany from Russia and Ukraine, that they should completely abandon the transportation of meat, sausages, bacon and other pork products. This measure is implemented due to the outbreaks of African swine fever in these countries." Earlier, Lithuania and Moldova had announced to ban pork imports from the Ukraine. (Source: foodcontrol.ru)
Spain
Exports are booming
Pork shipments were up 23% in the first half compared to 2011 with EU countries representing 78% of Spanish trade (+21%) in the first half of 2012 with strong performance in Italy (+30%), Germany (+47%), the Czech Republic (+300%) as well as with the UK, Denmark and the Netherlands. France and Portugal remain the major markets. (Source: various)
|
Pork prices Barcelona Market Week commencing 27 August 2012 | |
|
Cut Name |
Price range (Euro/Kg) |
|
Gerona Loin Chops |
2,90/2,93 |
|
Loin Eye Muscle |
3,96/3,99 |
|
Spare Ribs |
3,13/3,16 |
|
Fillets |
5,43/5,46 |
|
Round Cut Legs |
3,01/3,04 |
|
Cooked Ham |
2,42/2,45 |
|
Rindless Picnic Shoulder |
1,83/1,86 |
|
Belly |
2,40/2,43 |
|
Smoked Belly with Spare Rib Section Cut off |
2,83/2,86 |
|
Shoulder chap or Head Jowls |
1,43/1,46 |
|
Back Fat, Rindless |
1,28/1,31 |
Switzerland
Stability at Bell
Turnover for the first half of the year is up 1.7% to £814 m. with Switzerland accounting for 70% of turnover, Germany (Zimbo, Abraham) 18%, France 4%, other Western Europe 3% and Eastern Europe 6%. In total, the group produced 110,000 tonnes of product (unchanged) and employed 6,511 staff, half of them in Switzerland. (Source: AFZ)
Thailand
VPF expands
The largest pig producer in the North of the country is building a new farm of 6,000 sows at a cost of £25 million, which will start producing slaughter pigs by 2015. VPF already operates a farm of 6,500 sows, a feed mill and an abattoir. It also plans to invest £4 million in meat processing. (Source: Asian Pork)
Export approved plants
Out of 7,000 Thai abattoirs, only seven are export approved. This includes of course VPF and SK Inter Food also in the North. The latter with a large pig farm and a production of 1,000 pigs per week, owns eight shops as well as supplying local supermarkets. Betagro is also a major player with 80 stores nationwide and 30 meat stalls in Bangkok wet markets (Source: Asian Pork)
Ukraine
ASF concerns
FAO has released a report warning about the rapid spread of ASF, attributing the disease's rapid dissemination to human factors such as swill feeding, in which food scraps and other waste materials are fed to domestic pigs. FAO studies on ASF in the Russian Federation indicate that swill feeding is responsible for 97% of all new infections in domestic pigs. Infections typically occur first in the backyard sector, which accounts for 34% of the entire domestic pig population and where bans on swill feeding would be challenging to enforce as it is a low-cost option for feeding pigs. In 2011, up to 300 000 pigs died or had to be slaughtered as a result of ASF outbreaks in the Russian Federation, incurring an estimated $240 million in economic losses. Regarding the first ASF outbreak in Ukraine, the Government responded quickly, implementing sanitary measures, culling affected pigs and imposing a quarantine zone around the village where the outbreaks occurred. Most importantly, Ukraine has paid farmers compensation for pigs that were slaughtered and properly disposed of. The Ukrainian Government allocated UAH3.2 million (about US$395,000) to buy all pigs within the 10km quarantine zone around the epicenter of the first registered ASF outbreak in Zaporizka oblast. Volodymyr Gorzheyev, Head of the veterinary and phytosanitary service of Ukraine says that the owners of the pigs in the area will receive UAH 18.2/kg compensation. The pigs will be slaughtered and the meat obtained will be used for production of sausages. (Source: PigUa.info, pigprogress.net)
USA
"Tsunami of red ink"
US pig producers are facing record losses. Over the summer, producers lost around US$30/pig. Losses are forecast to reach US$60/head in the fourth quarter, followed by US$38 in the first quarter of 2013 and US$5 in the second quarter. The issue is with the short term with large numbers of pigs coming forward putting downward pressure on prices and losses will be incurred on pigs already born. A solution would be to slaughter pigs at lower weights but this is not yet considered by the major processing groups. As the financial position of many producers had not recovered from the 2008-2009 crises, they are facing this major crisis in a weakened state and bankruptcies look unavailable. (Source: Pork Network)
Intervention on the market
President Obama has implemented a pork purchase programme of US$100 million for various federal food nutrition assistance programs, including food banks. This has been described as "too small" to stop the erosion of prices and margins. (Source: Pork Network)
Sow cull on the rise
In the first two weeks of August, 35,000-40,000 extra sows were culled as farmers prepare for a rise of feed prices according to Brumm Swine Consultancy. A wider thinning of sow numbers is expected over the next few months with concern for slaughter capacity and sow meat prices. (Source: Pork Network)
Vietnam
Pig crisis
Falling pig prices, rising feed costs, impact of PRRS, shortage of capital and plunging demand for pork are hitting Vietnamese pig farmers, many of whom have already shut down their farms. Vietnamese consumers are shunning pork due to a spate of scandals on the use of banned feed additives (see bulletins passim). Prices have fallen so far this year to as low as 92p/kg live weight and farmers are losing £19 to £39 per pig. With pork representing 70% of meat consumption in the country, imports are expected to rise fast. (Source: Asian Pork)
Government subsidy scheme
The government is planning to inject £270 million to the 3,000 pig farms affected by the fall of prices. These will have their debt extended and the level of interest lowered below 10%. (Source: Asian Pork)
US$1 = EUR0.80 (September 3, 2012)
