The British average (DAPP) closed in August at 148p/kg, nearly 5p short of its July maximum. Furthermore, having opened a gap of 4.5 per cent over 2010 at the beginning of the month, the premium has now narrowed to 3.5 per cent. However, with feed costs at a similar level to this time last year, producers are likely to see margins stabilise following the declines of last year when feed prices were rising.

Scottish abattoirs killed nine per cent more prime pigs during the first seven months of the year than in the same period of 2010, with monthly figures for July also posting a nine per cent increase. UK slaughterings were also ahead of last year for the first seven months, at seven per cent, with July throughputs up 10 per cent on the same month last year.

Production volumes data suggests that the UK produced nearly seven per cent more pigmeat in the opening six months of this year than last. Higher slaughter volumes and higher producer prices point towards some fundamental strength in the market. There is little evidence yet of supplies tightening as a consequence of lower productivity during the harsh weather of late 2010.

Having stabilised around the £46 a head mark earlier in the summer, weaner prices then began to fall sharply at the end of July, and this downward trend carried on through August. Prices have now fallen below £42 a head and are at their lowest in five months. Furthermore, weaners are 12 per cent cheaper than a year ago and only marginally higher than the level at which they commenced 2011. Prices have been driven down by abundant supplies.

Cull sow prices gradually moved higher as July progressed, beginning the month at 97p/kg dwt before closing it at more than 101p/kg dwt. Industry reports suggest that price movement was influenced by an increase in demand on the continent; a positive development given the release of pigmeat from private storage into the EU marketplace. In the final week of July, producer prices were 6.5 per cent higher than a year earlier.

Average EU grade E pig prices opened and closed August at €1.56/kg and maintained a four per cent premium over this time last year. Prices in major pig producing nations, such as Spain, Germany and Denmark have experienced annual gains of around four per cent, while their counterparts in France and Ireland have seen prices appreciate by six per cent over last August. However, Dutch producers have seen more modest gains of less than two per cent.

All remaining stocks of pigmeat held under the PSA scheme introduced at the beginning of the year have now been released from storage.

UK pigmeat exports posted their highest monthly total of the year so far in June, this pushed the total volume of pigmeat exported during the first half of the year (H1) up 10 per cent to 68,900 tonnes. Weak sterling and increased domestic production have aided overseas shipments.

In terms of imported pigmeat, volumes, at 187,700 tonnes, rose by 6.5 per cent year-on-year during the first half of 2011. However, the pace of expansion slowed in June as monthly volumes were just 350t higher than a year ago. Nonetheless, June imports were the highest monthly figure in three years.

Over the summer months, grain prices have fallen back from their highs during the spring, with feed wheat trading around £160-£170 per tonne. The resumption of exports from Russia and the Ukraine has eased some supply side issues along with upward revisions to production forecasts for the EU and the USA, while fears of another global recession have also held prices down from the demand side. Nevertheless, the market remains tight since lower forecasts of US maize production have increased the requirement for wheat to be used to feed animals. This changed market dynamic is likely to ensure that wheat consumption will still exceed production in 2011/12, which has led wheat prices to edge higher towards the end of August.

September 2011