SPP continues upward movement as Chinese demand shapes long-term picture

The EU-spec SPP has risen for the third consecutive week, recording an increase of 0.19p to average 137.96p/kg in the week ended March 23.

Despite the recent improvement, the measure remains more than 7p below year-earlier levels. Industry reports suggest that processors have stockpiled product in cold stores in order to prepare for Brexit, which is having a negative effect on demand, according to AHDB.

Estimated slaughterings for the week were down by 4,000 head to just over 160,000 head, as issues at one processor reportedly caused a number of pigs to roll into the following could explain some of the decline.

Throughputs were also down on the previous year, by 4% (-6,900 head). Carcase weights in the week, averaging 84.88kg, were down slightly on the previous week but over 1.3kg heavier than the same week of 2018.

However, the EU-spec APP fell slightly, by 0.12p, to average 142.77p/kg in the week ended March 16. It remains below year-earlier levels, by 5.56p. 

Meanwhile, in the week ended March 23, 7kg weaner prices fell by 10p to average the week on £35.45/head. The price is currently £2.56 below the 2018 price.

To see Pig World's weekly price graphs, click here

Flat retail sales

It was a mixed picture for pork sales in the 12 weeks to February 24. The quantity of fresh and frozen pork sold over the period actually rose by 1%, although the sales value fell by the same amount. 

Bacon purchases fell by 5% in quantity, despite average shelf prices falling slightly. Kantar reports 3.7 million fewer shopping trips included bacon compared to the same period last year. The overall bacon spend fell by 6% as a result.

Sausage and sliced sales remained virtually stable on the year (+0.7% and -0.8% respectively), but lower shelf prices meant the total spend suffered. Meanwhile, the number of pork pies and sausage rolls sold rose by 5% and 9%, respectively.

China and the global picture

Of greater long-term interest, the true impact of China's African swine fever outbreak on the global pork market is starting to emerge. 

China’s Ministry of Agriculture and Rural Affairs recently reported that its pig herd had fallen by nearly 17% in February compared with the previous year, with the sow herd down by over 19%. The US Department of Agriculture’s attaché in Beijing recently that China’s total swine inventory in 2019 would fall by 13% to 374 million head, largely due to ASF.

Struggling to meet its own needs, China is importing more pigmeat, with a knock-on effect on global prices. US prices have been risen sharply on the back of this increased demand, with some forecasts suggesting Chinese imports could reach record levels this year. 

EU pork exports strengthened at the turn of the year, partly due to a large increase in demand from China, with anecdotal reports suggesting Chinese import demand has continued to escalate in recent weeks. 

"For UK farmers and processors, this combination of events may have a new significance if the country leaves the EU with no-deal. We would expect a surge in Chinese imports to boost demand for UK product in any case, but the timing could be particularly useful under a no-deal scenario due to the compromised competitiveness of exports to the EU," AHDB lead analyst Duncan Wyatt said.