A Lethal Combo: Imports, Demand and Weaker Pound
UK - In his Traffic Lights commentary this week, Peter Crichton writes that spot sellers were disappointed to be on the receiving end of lower prices this week due to a lethal combination of cheaper imports, poor retail demand and recent falls in the value of the Euro, which closed on Friday worth 78.7p compared with 80.4p a week ago.October 31
A lethal combination
One bright spot was slightly firmer demand for lighter cutter weight pigs which in some cases were traded at above 130p, whereas spot bacon met a much more subdued demand with prices anywhere between 122–127p available according to region and specification.
The cull sow market also took a major knock with reports of full cold stores in Germany and other European countries and the Russian market very hard to penetrate.

As a result export abattoir quotes were down from between 8–12p with some as low as 104p, but in the main quote tended to be in the 106–108p range according to specification and in just one week sows have fallen in value by £13-£18/head.
Exporters are also warning of further price drops in the weeks ahead during the run up to Christmas so producers are advised to keep selling rather than wait for an upturn which is unlikely to appear before next year.
Some of the fizz has also come out of the weaner market reflecting less confidence in finished pig prices over the next 10–12 weeks and the latest AHDB 30kg weaner quote has now slipped to £43.86/head.
Probably the only other ray of sunshine is for those pig producers who have not locked into feed prices and are buying on a monthly basis with feed wheat now quoted at £82/tonne compared with £145/tonne a year ago.
Unfortunately Soya, amino acids and other feed ingredients are still dear and rather like the price of petrol we have yet to see any major falls in compound prices, although they are certainly heading in the right direction.
October 24
Poor demand across Europe
The gap between contract and spot prices continues to widen with contract sellers on DAPP + 4p being paid at 140.15p whereas spot sellers had to settle for between 10p–12p less than this.
The underlying problem is not so much a case of too many pigs, but very poor demand across Europe.
Those of us who forecast better prices this autumn got it wrong and did not allow for the banking crisis that has recently erupted.
Lighter pigs were traded at up to 144p mainly from specialist outlets and some of the smaller abattoirs seemed to be under less retailer pressure than the big boys.
Probably the only positive factor to emerge from the ongoing upheaval in the financial markets is a further weakening in the value of the £ which helped the € to rise to 80.4p at close of trading today.
The weaner market has managed to hang on to recent gains on DAPP based contracts, but spot buyers are less keen reflecting poorer finished pig prices.
The latest AHDB30 kg weaner quote has eased a touch to £44.39/head.
All in all a disappointing day’s trading, especially at a time of year when demand normally improves.
October 17
Two-tier trade developing
A two-tier trade is emerging with DAPP-based contract sellers still reasonably well protected from falling European Union pigmeat prices and although further reductions in the DAPP are forecast in the weeks ahead, it actually rose this week to 136.51p.
Much more of a cold blast was felt through the spot bacon sector where quotes tended to be in the 130–133p range and it was very difficult to get more than this or in some cases to find space, with buyers less than enthusiastic quoting very poor consumer demand, recent drops in the value of the € against a strengthening £ and cheap imports as major problems.
As a result lighter pigs failed to attract more than a 4–6p premium with cutters traded around the 140p mark from specialist outlets.
The € closed the day on Friday worth little more than 77.9p which is 3 percent down on this time last week and effectively reduces imported pigmeat by a similar amount and this has impacted on cull sow quotes.
European pigmeat traders are warning of further falls in pigmeat and cull sow prices in the weeks ahead as stocks build up, unless demand improves in the retail sector where consumers are affected by the current credit squeeze.
Cull sow quotes have fallen by between 4–6p with top bids little more than 120p/kg.
Weaner prices all appear to be flattening despite sharp falls in feed costs for those producers buying on a weekly basis with ex farm feed wheat quotes of little more than £80/tonne compared with £150/tonne a year ago.
The AHDB 30kg weaner average is now quoted at £44.93/head, but premiums of £2-£3/head higher than this are available from some buyers.
Although the pigmeat/feed ratio is much more favourable than it was a year ago, producers remain concerned that some of the major retailers will seek to drive down producer prices at a time when some producers are barely breaking even.
The current lack of demand is also painting a rather bleak picture for trade over the notoriously difficult Christmas period and we may have to look to the spring before any significant recovery is on the cards.
October 10
Bit of a grim day, like the economy in general
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 £ 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 £ 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 £90/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 £45.05/head and once again spot trades have been reported at £2 – £3 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.