At least the pig market has proved to be a lot less volatile than the Stock Market where a roller coaster ride would be something of an understatement.

A slight fall in the DAPP which is now quoted at 136.21p was a ready pointer that there was unlikely to be any more money on the table for spot sellers and this proved to be correct.

Most contract abattoirs were well supplied and very few were looking for extra pigs which meant that spot quotes tended to hover around the 135p region with some variations according to specification and region.

Lighter cutters continue to earn a modest 4 – 6p/kg premium, but in all sectors most traders commented that demand remained a shade subdued with the added problem of some foreign imported pigmeat slightly undercutting the domestic product.

The value of the € has also remained greatly influenced by the strength or the weakness of the 3 and during the course of the last five days the € has ranged in value from between 77.5p to 80.2p closing on Friday at 79.1p.

If currency traders have more confidence in the € than the 3 in the weeks ahead this should help to put up the cost of imports and also stabilise the cull sow market where prices in Europe have moved noticeably lower.

Cull sow prices are now back to where they were in early August with a base price of circa 120p/kg, although it is worth reflecting that in early May 95p was considered a good price.

Further falls in the value of feed wheat which in some regions can now be bought at just under 390/tonne are one of the most positive factors emerging to the benefit of the pig industry, but in an almost complete reverse of what happened last year, many producers decided to take feed cover well before harvest and have since seen prices drop further.

Although cheaper feed means better margins for weaner buyers, the AHDB 30kg ex farm weaner average has remained almost unaltered at 345.05/head and once again spot trades have been reported at 32 – 33 ahead of this in some regions.

With no more than eight clear trading weeks before the dreaded “pull forward for Christmas“ period hits us, the opportunities for any significant price rise between now and the end of the year look slim. Providing the DAPP can hold at around the 135p region, this should still allow most producers to hold their own until (hopefully) we see a significant price improvement next spring providing numbers continue to reduce throughout the EU and there are no more nasty shocks in store in the currency markets.

October 3
Could do better

Although the DAPP took a useful upward step this week and now stands at 136.4p, spot prices have remained virtually unmoved continuing to reflect rather indifferent retail demand and the availability of cheaper imports which appear to have snuffed out hopes of an autumn price surge.

As a result most spot bacon quotes were in the 135–138p range according to specification, whereas those producers on DAPP plus 4p contracts were a shade better off.

The recent cold snap may however help to trim growth rates and reduce the number of pigs coming forwards and according to high cull sow slaughtering levels throughout the EU, a further downturn in finished pig supplies is forecast later this year and early in 2009.

Bearing in mind all the gyrations of the Stock Exchange, it is slightly mystifying to know why the 3 has recently strengthened against the € which has now dropped in value to close on Friday at 77.7p.

However this helps to explain one of the reasons why cull sow quotes have dropped back to a base price of circa 125p compared with 130p plus during September.

But with sows worth less than 105p three months ago, current values still represent an excellent return to producers, especially those looking to depop and re-stock ageing herds.

Weaner prices which have also continued to rise since the start of the year appear to have levelled with the AHDB 30kg quote now at 345.04/head ex-farm.

Reports of feed wheat trading below 3100/tonne have yet to filter through to compound prices where finishing rations are still costing 3170/tonne or more with compounders claiming that high manufacturing, haulage and supplementary ingredient costs are overwhelming the benefits from the main ingredient feed wheat trading at almost half the value it was a year ago. This confirms the old saying that what goes up may not come down, or if it does it will do so slowly!

Forward cereal prices are painting a slightly more favourable picture for buyers with November wheat available ex farm at circa 399/tonne and soya prices (due to the weakness of the $) are also tending to ease, but are still over 3220/tonne ex port.

Those of us hoping for a mid autumn price rally are looking to the spring before any major upturn is seen with widespread reports of the effect that the “credit crunch“ is having on the retail market also serving as something of a negative factor.

In school term reports “could do better“ is where we are.

September 26

Although British pigmeat supply and demand remains more or less evenly balanced, reports of cheaper European Union pigmeat heading across the Channel (but not via the Tunnel) have put something of a brake on the autumn price rise that many of us were hoping for.

The DAPP also closed fractionally down and is now quoted at 135.92p, but this is mainly due to the higher weights and probes of pigs going through the system which has effectively reduced the price per kilo paid to producers rather than any lowering of base prices.

Spot bacon bids today ranged between 136–138p in the main according to specification compared with circa 140p paid for contract sellers on DAPP-plus-4p.

It is still hard to justify selling pigs at lighter weights with only a fairly modest 4–6p premium available for cutters while many producers are benefiting from selling pigs on to heavy bacon contracts to 90kg or in some case 95kg deadweight.

Recent widespread use of PCV2 vaccines has also tended to put up backfat measurements as health levels improve and 14 probe contracts are now advised to help overcome price penalties on tighter specs.

The cull sow market also took a downward step following reports of easing manufacturing pigmeat prices throughout the European Union and 130p has become more of a target than a base price for sellers.

Although the value of the euro has remained almost unmoved, closing on Friday worth 79.4p, a recovery to 80p or more would greatly help the pigmeat import/export balance of trade.

Weaner prices have remained firm, helped by the prospect of continuing falls in the value of feed wheat which was traded this week at 395.40 a tonne ex-farm compared with 3163.40 a tonne a year ago.

The Agriculture and Horticulture Development Board weaner average has continued to nudge upwards and is now quoted at 343.38 a head, although it is still quite hard to buy or sell within 32- 33 of this figure.

The benefits of lower feed wheat prices have yet to make much impact on the cost of compound feeds, although as many producers have pointed out the compounders were quick enough to put the prices up a year ago as soon as the first expensive feed cereals hit the mill.

Whilst the outlook for pigmeat sales this autumn remains reasonably firm, there is probably only a ten week window between now and Christmas for any significant price recovery to take place, which many still hope will help to put some profit back into the system.

Otherwise we may have to wait until the spring before any significant price improvements benefit producers.

September 19

Rather like the weather in East Anglia, trade improved as the day wore on.

Although the DAPP only nudged up by a mere fraction and now stands at 136.05p at least this was in the right direction and very few spot buyers had the courage to offer lower prices for next week, although some tried to suggest this on Thursday.

As a result most spot bacon traded circa 138p and there was a generally a better uptake than a week ago.

Despite the provisional June 2008 pig census only showing a 12-month drop of 3 percent in the number of progeny pigs available, clear signs are emerging of a supply shortage at the start of autumn which (providing demand also improves) should help to push prices higher in the weeks ahead.

But the census drop of 8 percent in sow numbers looks to be understated based on the very high numbers culled at the start of the year.

There was also a slightly better uptake for lightweight cutter pigs which traded in the 140-144p range at a time when lamb and beef prices are also firming which should help put up the value of pigmeat during the crucial autumn trading period.

Unfortunately reports of falls in pig prices in some European Union countries have proved to be a negative factor when coupled with the recent recovery in the strength of the 3 which means that the € has now dropped to 78.7p compared with 80.7p two weeks ago.

German cull sow processors have also reduced their buying prices over the past week by the equivalent of 4p/kg and although United Kingdom producers will not have to bear all of this drop, export abattoirs generally dropped their pigs by 2–3p with 130p now a realistic base price.

No real improvement has been seen in the AHDB 30kg ex-farm weaner average which is quoted at 342.75/head, but still lags 33 - 34 behind recent reported sales.

Weaner buyers are keeping a wary eye on the calendar bearing in mind the proximity of Christmas which normally tends to be a more difficult time to sell finishers.

But on the other hand reports of feed wheat now trading at circa 3100/tonne are helping to put a better margin back into finishers’ hands, although many have commented that (as with the price of oil) very little of this has yet to filter through to lower compound prices.

Although there is a saying “what goes up must come down“, as far as many pig industry costs are concerned this is often not the case!

September 12

Although the DAPP took a downward turn, slipping 0.61p to stand at 135.91p, spot quotes opened the day at relatively similar levels to last week, but 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.