BPEX Export Bulletin-December 2012 (Week 50)

 

 

This week's export news

 

The week has been dominated by the Russian ban on ractopamin-treated US pork and beef (also on the beef side, the report of a case of BSE in Brazilian cattle is also momentous). This could have some impact on EU pork demand and prices. The USA had a Russian quota of 51,600 tonnes for 2012.

 

GIRA 'Meat Club' stresses that 2013 will be a difficult year for European pork processors. They will have to deal with increased overcapacity with fewer pigs and higher input prices. Prospects to pass the price increase down the chain are poor and they face uncertainties on export prices. The most treacherous time will be early summer when a possible shortage of some cuts may inflame pig prices. The consensus of Dutch, French and Danish forecasts is for a price rise of 10% for the whole year.

 

Following the meeting on 22 November with AHVLA in Carlisle on Export Health Certification for China, exporters have reported some marked improvement with the administration of the scheme.

 

Jonathan Eckley is joining the BPEX-EBLEX export team from January 2013. Jonathan is currently EBLEX Regional Manager for the South East region. He has a strong background in agricultural economics and livestock marketing and took over the compilation of this bulletin last month.

 

 

Denmark

 

Rising bacon sales

 

According to the Tulip Food Company, general bacon sales increased by almost 10%t last year in Denmark, per capita consumption has reached 3kg. Growth was especially strong throughout the autumn. In recent years, Tulip also had double-digit growth in sales of bacon in Germany, Sweden and Italy. (Source: Landbrugsavisen)

 

Pig producers increase earnings

 

It is predicted that pig producers are going to achieve average profits of €67,000 compared with losses of €40,000 last year. The figures are forecast from the Food Economic Institute. It is estimated that the surplus in 2013 will increase to €200,000. (Source: Landbrugsavisen)

 

Tican has to drop own production of pigs

 

The "NO" was loud and clear from shareholders to the proposal from the Tican Board to commence pig production. Tican's Board made the proposal to the co-operative owners to amend the purpose of the company statutes to include pig production, in addition to being a slaughterhouse. The proposal aimed to encourage pig supplies and help remedy current shortages. Tican planned production in rented premises. (Source: Tican)

 

Danish profit in Poland

 

Poland has been reported as a success in both Tican and Danish Crown's financial statements. Tican reported a small surplus in its Polish subsidiary for the first time. Danish Crown has maintained strong earnings in the Polish meat company, Sokolow, which it owns in a partnership with HP Scan. The company increased its revenue by 18%. In the first nine months of 2012, turnover reached €670 million, with a profit of around €23 million. The company is Poland's largest producer of refined products and is the second largest pig slaughterhouse in the country, after the Smithfield-owned, Animex. (Source: Landbrugsavisen)

 

MRSA spreading

 

The pig bacteria, MRSA, is now spreading in Denmark. Infection is centered on people who have had contact with pigs. However, new figures show that those with no contact have increasingly become infected. Out of 59 cases in the first 11 months of 2012 in North Jutland, 14 had had no contact with pigs. It is estimated that one in six Danish pig herds is infected. Pig farmers are obliged to inform employees and trading partners of the infection. However, they do not always do so. (Source: Politiken)

 

Market

 

European markets are fairly quiet. As a whole, the Christmas trade to industrial customers is coming to an end. There is pressure on prices for both legs and quarters, sales have been maintained at slightly lower prices. Exports of loins and collars are stable at similar price levels. Bacon exports to the British market are also stable, so are sales of backs and gammons. Exports to third country markets remain unchanged. Exports are reported to be stable to China, while the Russian market remains quiet. (Sources: Danish Crown, Tican, Danish Food Council).

 

Danish Slaughterhouses - payments week commencing 10 December 2012
Slaughterhouse	Danish Crown	Tican
Slaughter pigs (70.0 – 86.9 kg)	Euro 1.600	Euro 1.600
Difference to last week	-0.027	-0.027
Sows (Above 129.9 kg)	Euro 1.132	Euro 1.132
Difference to last week	Unchanged	Unchanged
Boars (Above 109.9 kg)	Euro 0.962	Euro 0.962
Difference to last week	Unchanged	Unchanged

 

 

France

 

Going into receivership

 

The family business, Iller, which specialises in fine coarse sausage production with 230 employees and a turnover of €46 million, is going into receivership. Their President, André Iller, invested €3 million in 2010 in the production of frozen flamed tarts and has not ruled out joining a larger group. However, a proposal needs to come quickly as the deadline is 29 January, 2013. Boussard, the rillettes manufacturer located in "Le Mans" (the French capital city of rillettes), went into receivership last month. The company had a turnover of €1.5 million. (Source: AHDB)

 

Fleury-Michon in Canada

 

The company which had some difficulties starting a subsidiary in Canada, is about to launch a full range of charcuterie products under the Fleury-Michon brand. (Source: AHDB)

 

Staff under threat in Ablis

 

The Geo Madrange site, located south of Paris near Ablis, which (since 2001) has  belonged to Monique Piffaut, the President of Turenne Lafayette group, could cease manufacturing activity and be converted into a depot, threatening 155 jobs. (Source: AHDB)

 

Market

 

In spite of stable German prices, the 56 TMP basic price had difficulty maintaining stability. Due to low demand, abattoirs are not buying. According to "Marché du porc breton" prices eased by €0.012 last Monday at Plérin.

 

The French market is stable. Supplies are seasonally lower and prices are higher for 8kg piglets in some regions. Demand is a little volatile.

 

Export activity is very low. American meat is very competitive with a 6.6% increase in exports in the first 9 months of the year. According to "Marché du porc Breton", from January to October, sales from Brazil were 12.25 % higher. (Source: AHDB)

 

Pork prices Rungis - Week commencing 10 December 2012
Cut name	Price range (Euro/Kg)
Back fat, rind-on	0.85
Trimmings	1.61
Leg	2.60
Loin including chump	2.90
Loin excluding chump	2.65
Belly extra without trimmings	2.68

 

 

Germany

 

Doubts over the 'human nose'

 

In the main German plants, entire pig and boar taint is controlled using the 'human nose' technique. There are now major doubts whether this technique really works in eliminating tainted pork. (Source: various)

 

Higher slaughter throughputs

 

The number of pigs slaughtered has risen in the past week to 1,059,788 pigs, about 24,000 higher on-week and a new high for the year. This is a normal pre-Christmas trend. The pork market has stabilised at a significantly improved price level. Available quantities can be marketed quickly. Supply and demand on a relatively high level will be in balance over next week. The weaner market is subdued. (Source: various)

 

Pharmaceutical production

 

The Tönnies group is entering the pharmaceutical market and is investing €21 million over the coming year. A factory for the production of heparin will be built under the name, Veracus GmbH. Heparin is prepared from the intestinal mucosa of swine. The substance is used for preventing thrombosis and the therapy of embolism. (Source: Tönnies)

 

New restaurant concepts

 

Berlin is very much the experimental springboard for new German food service concepts. Following the "Steak 2.0" wave, the "Curry Wurst 2.0" concept is taking the famous Berlin specialty upmarket. (Source: Niehues, brand.m)

 

Pork prices Hamburg Market Week commencing 10 December 2012
Cut name	Price range (Euro/Kg)
Round cut leg	2.30/2.45
Leg (boneless, rindless max fat level 3mm	3.10/3.30
Boneless Shoulder	2.75/2.90
Picnic Shoulder	2.25/2.40
Collar	2.40/2.60
Belly (bone in, ex-breast)	2.60/2.80
Sheet Boned Belly (rindless)	2.45/2.75
Jowl	1.60/1.75
Half Pig Carcasses U class.	2.10/2.20

Netherlands

 

Pig trotters to China

 

The Netherlands is now allowed to export pig trotters to Mainland China. This is an important step that we are aiming to emulate. (Source: Pig Progress)

 

 

Spain

 

In 2012, estimates show that pork production will increase by 4%. However, specialists ascertain that the real figure will be closer to 5 or 6%. Despite the implementation of new sow welfare standards, GIRA anticipates production to rise by 1% in 2013 against a background of falling EU production. In 2014, more piglets will be born in Spain than Germany. (Source: GIRA)

 

EU

 

Feed conversion ratio the key

 

Producers with a feed conversion ratio (FCR) of 2.8 had an average gross margin of €12.66 per pig in Europe. (Source: GIRA)

 

2012 a good year for exports

 

This year, EU pork exports have stabilised at higher values. The average price for cuts was up by 13.4%, offal 15.9% and fats 33.4%. In contrast, export prices for rendered fat fell slightly. Third Country exports have been the success story of the last decade. (Source: GIRA)

 

 

Russia

 

Consumption forecasts

 

Pork consumption should level in 2013 at around 25kg per person. The implementation of the WTO agreement, where pork quotas have zero tariffs should keep prices down. It is anticipated that there will be lower imports from the USA and Canada (some due to the ractopamin issue) leaving more space for EU pork. However, the price difference between pork and poultry remains wide. Turkey is a new product for Russia with fast growing production and consumption. Turkey has a higher retail price than pork. Russian consumers are becoming savvier regarding product quality and provenance. (Source: GIRA)

 

 

Belarus

 

Import ban

 

According to information posted on the Veterinary Supervision Department's website, the import of pork and pork-derived products from Stavropolskiy Krai of the Russian Federation to Belarus is forbidden, to prevent the possible spread of ASF to Belarus. (Source: naviny.by)

 

 

Ukraine

 

Lower pork prices

 

The Ministry of Agrarian Policy and Food has reported the average purchase price of pork decreased by 1% over the past month. As of 11 December, the price was UAH18,549 per tonne (US$2,295 per tonne). Compared with the corresponding period in 2011, the price has increased by 8%. Depending on region, prices can fluctuated from US$1,731 per tonne in Ivano-Frankivska oblast to US$2,535 per tonne in Luhanska oblast. (Source: PigUA.info)

 

 

Canada

 

Stress on producers

 

In recent years, Canadian pork producers have faced pig disease, high feed prices, the US COOL regulations and the high Canadian dollars. This resulted in a 20% reduction in sow numbers. 2012 saw the takeover of two of the largest pig producers by processors, Maple Leaf and Olymel. Producers' returns during 2011 were slightly positive but were C$10 in the red during 2012. (Source: GIRA)

 

Trade negotiations

 

With foreign trade accounting for 45% of the country's GDP, Canada benefited from NAFTA  and GATT/WTO agreements. However, with the failure of Doha, Canada feels it is falling behind the USA on market access, particularly for pork and is pushing hard for Free Trade Agreements. This includes very active negotiations with the EU, the Ukraine, Korea, India (long term), Dominican Republic, Panama, the Trans-Pacific Partnership and China. (SourceL Canadian Pork)

 

 

China

 

Lower imports

 

Imports are falling fast. In September, only 19,000 tonnes of pork and pig offal were imported to the Chinese Mainland compared with 121,000 tonnes in January and 83,000 tonnes in February. However, Mainland imports are predicted to increase in 2013 to around 800,000 tonnes with the USA and Spain being the main beneficiaries. (Source: IFFO – MOFCOM, GIRA)

 

Urban-rural split

 

Meat and food consumption is growing fast amoungst the rural Chinese population. However, the gap is growing between urban and rural consumers, as urban incomes are rising faster. This has been highlighted as a key action point by the new leadership. This could be translated by further increases of pork demand in the medium term. (Source: GIRA)

 

Poultry paradox

 

The Chinese poultry situation is worth a mention. Chinese consumers and even Kentucky Fried Chicken with its 3,100 outlets are favouring dark meat and wings against white meat. In some instances, chicken breast is used in pet food as there is no other market for it. Poultry is cheaper than pork in China with production and consumption rising faster than for pork. (Source: various)

 

 

Korea

 

Rebound confirmed

 

Korean consumption has recovered its long term growth trend, following the FMD epidemic last year to 1.065 million tonnes. Production has rebounded and imports have fallen but by less than expected. As a result of plentiful supplies, retail pork prices have halved. (Source: GIRA)

 

 

USA

 

Cargill's views on US pork production

 

In 2013, US pork production will decline by 1 to 2% and consumption will hit a record low despite lower prices in real terms. On the other hand, processors are very optimistic regarding world trade and expect exports to soak up any additional production. In October, US pork production reached a new record high. For 2012, the Ohio State University model forecasts an average loss of US$12 per hog.  (Source: Cargill, various)

 

Continued losses

 

Pork producer losses eased last week as margins improved by nearly US$7 per head in week ended 7 December to US$28.75, according to Sterling Marketing. Abattoir margins declined on-week and slipped into negative territory following a long profitable period.  (Source: Pork Network)

 

 

World

 

Production forecasts

 

World pork production should continue to grow in 2013 increasing by a further 1.5% to 100.619 million tonnes. (Source: GIRA)

 

It's all about ethanol production

 

It has been calculated that 40% of the price rise of corn in the USA is linked with the use of corn in ethanol production. US corn prices in turn have a key influence on world grain prices and thus, pig feed prices (there is a correlation between US corn, soy prices, corn and wheat prices). There is no political will in the USA to change their ethanol policy. At a recent meeting between Cargill and President Obama, demand for an end to ethanol subsidies fell on deaf ears. In short, meat producers in the USA and Canada are squarely blaming ethanol policy for the world meat crisis. (Source: various)

 

US$1 = EUR0.76 (Dec. 17, 2012)