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Retailers Resist Price Rises

04 December 2012

UK - With wheat prices continuing to rise and grain futures quotes up by almost £7 over last week, producers were hoping (largely in vain) that this rising burden would to some extent be offset by better pigmeat prices, but sadly this was not to be, writes Peter Crichton.

According to major processors some retailers are playing hardball and it has been very difficult for them to get more margin into the product, hence nothing to pass back to the producers at a time when they sorely need it.

Although the DAPP moved up a shade and now stands at 160.42p, Tulip decided to leave its shout price at 159p for the seventh week in succession. It was hardly surprising that all the other major shout price operators also stood-on:

163p Woodhead.
160p Gill.
159p Tulip and Vion.
158p Cranswick.

Although earlier in the week spot buyers had indicated they might be looking for some extra pigs, as it turned out this was not the case and with extra numbers to be sold, spot quotes, if anything, eased a shade with bacon mainly traded in the 161p–163p range. Reports of cheaper continental imports have also helped to unsettle the market.

Fresh meat wholesalers are also reporting an indifferent demand in the run-up to Christmas, but with colder weather ahead perhaps this might stimulate consumers’ appetites and at the same time slow down pig growth rates.

Despite the euro gaining in value, trading on Friday worth 81.28p compared with 80.90p a week ago, cull sow values have remained at stand-on levels, also reflecting the upcoming Christmas holiday reductions in processing capacity throughout Europe.

As a result most cull sows were traded in the 113p–116p range according to spec and load size.

The weaner market is continuing to improve mainly due to a more optimistic forecast for finished pig prices in the year ahead and the latest AHDB 30kg ex-farm weaner average has now risen to £45.66/head, but is still well behind production costs especially in the light of more expensive food.

More interest is also being shown in 7kg pigs which were generally trading in the £33/head-£35/head range, but finishers remain aware of the very high feed costs associated with taking pigs from 7kg to 110kg and this is to some extent tending to overshadow the market despite the fact that heavy baconers are now realising more than £130/head.

On the feed front as reported earlier prices are continuing to harden with ex-farm feed wheat trading at over £210/t and forward quotes on the LIFFE futures market saw January wheat traded at £225.45/t and July 2013 as high as £229.35/t.

Looking ahead producers will be interested to see further details of the Tesco price structure for their proposals to source pigs direct from producers at sustainable prices which should help to add value to the pigmeat supply chain as a whole, as well as what the future might hold for the Vion Group.

Reports are circulating that a Vion management buyout may be on the cards and if this is the case, it will be interesting to see if the pork division is separated from poultry and other meats. Coupled with the Tesco proposals it will be interesting to have two new players in the market at a time when pig numbers both in Europe and the United Kingdom are starting to drop which could provide producers with a fairly exciting spring, but something needs to happen well before then or more will be forced out of business.

Trafficlights Peter Crichton

ThePigSite News Desk

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