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Significant Lift in Coming Weeks a Possibility

by 5m Editor
13 September 2008, at 8:09am

UK - Although the DAPP took a downward turn, slipping 0.61p to stand at 135.91p, Peter Crichton says that spot quotes opened the day at relatively similar levels to last week in this week's Traffic Lights commentary. However, by noon one or two buyers had come back in the fray and were prepared to put a copper or two more into the pot.

The feeling in the trade is that although some European pigmeat prices are showing an easier trend, these are in some cases higher than they are in the United Kingdom with the result that processors have been prepared to take reasonably good volumes for next week of home-produced pigmeat.

If retail trade improves we could see a more significant lift in the weeks ahead providing that European prices hold firm.

Most spot bacon was traded in the 136–138p range with slightly higher prices available on a tighter spec and for lighter weights which saw cutters at circa 140p.

But some of the fire has gone out of the cull sow market where buyers were much more inclined to operate at stand-on levels with warnings of potential price drops later on next week.

This is allied to a weaker euro which closed on Friday at 79.2p compared with 80.7p a week ago.

As a result most cull sow export bidders were tendering prices of not less than 130p flat rate with premiums available for larger loads.

Cull sow throughputs have recently benefited from the high prices which have encouraged some producers to cull heavily and re-stock with gilts, in some cases on a BOGOF (buy one get one free) basis.

Reports filtering through of feed wheat now trading at little more than 3100/t ex farm should help to stimulate demand for weaners, although currently very little of the benefit of lower cereal prices has filtered through to compound ration costs which still include expensive soya and other ingredients.

The AHDB 30kg ex-farm quote of 342.95/head is still well detached from reality where most 30kg pig spot weaner trades have been reported in the 345- 348.50 bracket.

Although some pig producers will be benefiting from the abundance of cheaper feed wheat due to the absence of a proper summer this year, feed quality will be down and straw will in many cases be hardly worth baling.

The dreadful weather situation was summed up by one farmer who remarked “What’s the fuss? It only rained twice last week… once for 3 days and once for 4 days!“

September 5

Now that we have emerged bedraggled from the so called summer and the schools are back, the long-awaited upturn in demand is starting to filter through, although at this stage it is more of a trickle than a rush.

One of the best bits of news for the United Kingdom pig industry at present has been for the first time, for as long as anyone can remember, the value of most imported pigmeat (with the exception of Denmark) is on par with domestic prices and in fact once haulage costs are taken into account, it is in many cases dearer by the time it has landed on our shores.

Beef and lamb prices are also high and as a result retailers and caterers looking for “cheap“ alternatives are being forced to revert to pork which helps to put a very sound base into the market.

With virtually all contract abattoirs taking full numbers on the back of a slightly firmer DAPP which has nudged ahead to 136.52p compared with 108.62p a year ago, spot pigs were very thin on the ground. Those that were available attracted bids of 135p/kg plus and later in the day trades were reported in the 137–139p region with 140p being a fairly obvious target price in seven days time.

Lighter pigs were also continuing to earn modest premiums with cutters traded up to 144p/kg, but some sellers electing to take all their pigs on to heavier weights to earn better prices in the weeks ahead.

The cull sow market remains an excellent barometer for the overall health of European Union pig prices and despite all sorts of complaints from buyers that recent prices were unsustainable when compared with European values, export abattoirs were prepared to put another copper or two on offer to secure the numbers they need.

Cull sow slaughter statistics are also providing clear evidence of a significant shortage in finished pigs this autumn.

The monthly sow slaughtering average for the first four months of 2008 worked out at 23,500 head and this has since dropped back to just under 15,000 for August. Although some producers are seizing on the opportunities provided by high cull sow prices to de-stock and re-populate under performing units, there is still no real sign of any genuine expansion within the industry itself.

Reports from Europe are filtering through that sow prices have stopped rising and are now at stand-on levels. United Kingdom prices have generally moved ahead by circa 2p/kg with 130p regarded as the bare minimum and most sows traded 2–4p/kg ahead of this on a flat rate basis.

The € has also worked very much in United Kingdom pig producer’s favour recently and traded on Friday at 80.7p up by a whopping 18 percent compared with 12 months ago.

This rise in € effectively puts 18 percent on the value of exports and adds the same amount to imports, all of which is sweet music to pig producer’s ears, except when it comes to buying soya which is adversely affected by the value of the 3 against the $.

Another effect of high sow culling levels seen earlier this year has been dwindling supplies of store pigs with far more buyers than sellers in the market. Although the AHDB 30kg ex farm weaner price quoted at 342.95/head has yet to fully react to this, reports of weaners being traded between 345- 347.50/head are commonplace.

On the feed front while the latest ex farm quotes for feed wheat of circa 3105/tonne look most attractive especially when compared with the equivalent price of 3172/tonne a year ago, other feed ingredients remain dear and the benefit of lower feed wheat prices has yet to filter through to the overall cost of compound rations.

What the industry is still looking for is a period of sustained profitability to allow producers to claw back the horrendous losses suffered in recent years, especially in the aftermath of the foot and mouth crisis which hit us just over a year ago.

Retailers must understand that better returns for pig producers are not just an excuse for them to pay less in the future.

August 29, 2008

For sellers it was probably better to be out of the office in the morning and return in the afternoon because as the day passed by a generally firmer demand for pigs started to filter through in the market perhaps heralding signs of better things to come in the weeks ahead.

Although the DAPP took a very slight downwards step from 136.99p to 136.43p, most spot buyers operated at stand-on levels.

Lighter weight pigs also met more interest as some of the fresh meat wholesalers reported better high street uptake and hopes that now the holiday period is now drawing to a close with the schools back next week, better demand will kick in.

Spot bacon quotes at the heavy end of the trade to 95kg on a 14 probe were in the 132 – 134p region, but lighter weights and those on a tighter spec saw bids in the 136 – 138p area and cutters worth circa 140p.

Cull sow prices continue to edge ahead from the already dizzy 130p platform which has become an almost universal “base price“ with premiums available for larger loads, but sellers need to check if they are selling on a flat rate of a weight/graded basis.

The rising value of the € has also done the United Kingdom pig industry a few favours and closed on Friday worth 80.7p compared with 79.7p a week ago.

Reports are also emerging that in many of the meat markets, European carcasses are now being priced at similar levels to their UK counterparts or in some cases are even dearer.

Bearing in mind that the average EU producer price is now equivalent to 136p for a much heavier and often fatter carcass with lower bottom line deductions, this effectively means that imported carcasses will in some cases be dearer than our own and could open the door to pigmeat exports from the UK unless domestic prices start to move ahead.

The weaner market is also demonstrating more confidence in the outlook for finished pigs for the last quarter of the year with the AHDB 30kg ex-farm quote now almost touching 343/head, but still well behind recent transactions which have seen 30kg weaners traded in the 345 - 348/head range.

Overall the British pig industry is now looking in much better health than it did a year ago when we were in the grip of foot and mouth and limited cull sow exports meant they were only worth 55 – 60p/kg, but are more than double that today.

The late August 2007 DAPP was quoted at 109.14p and ex-farm feed wheat last harvest was trading at 3154/t.

But this should be no reason for premature celebration because as the autumn approaches retailers will no doubt be playing hardball with producer prices and the credit crunch may well result in meat being replaced by baked beans in some households.

5m Editor