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Numbers Tighter Than Expected

by 5m Editor
8 November 2008, at 4:23am

UK - This week, in his Traffic Lights commentary, Peter Crichton writes: Although DAPP eased back only a shade this week at 134.79p, spot prices have been in steady retreat since mid June and over that period have lost approximately 15p ( 310- 312 per pig) in value.

Although some sellers faced this Friday's trading with a touch of apprehension, as it turned out pig numbers proved to be slightly tighter than forecast and demand had also improved a shade with the result that most of the big spot buyers operated at stand on levels.

With some regional variations spot bacon was traded in the main between 125-127 p according to specification with lighter cutters nudging up to around the 130 p mark.

Contract space continues to be as scarce as hen's teeth with DAPP +4p contract pigs worth around around 12p/kg more than their spot counterparts, equivalent to 39/pig.

Reports from Europe also indicating that the recent sharp decline in European Union-wide pigmeat prices appear to have levelled out, but imports still pose a major threat to the domestic market with European average prices of no more than circa 112p/kg compared with almost 140/kg in early September.

The recent cut in bank base rates and the associated turmoil in the financial market has proved something of a blessing in disguise for pig farmers as the € strengthened against the 3 and the € closed on Friday worth 81p compared with 78.6p a week ago.

Another benefit which has in some cases yet to filter through from the banking sector is that overdrafts should (in theory) be cheaper as well.

Some cull sow buyers were suggesting earlier in the week that further sharp falls would hit the market and although bids were trimmed back by a copper or two, we may (hopefully) be heading for a more stable situation with most export abattoirs quoting prices in the 104-106p range according to specification and load size.

Weaner prices continue to retreat with the latest provisional AHDB 30kg ex-farm average now quoted at 343.74/head, although DAPP related weaner price deals tended to be 32- 34/head above this.

Those producers still buying feed ingredients on a weekly basis are probably earning a modest margin, but in many cases compound feeds have yet to fully reflect the current price of their ingredients and any further falls in finished pig prices this side of Christmas could encourage more producers to head for the exit door.

Looking ahead to next year there is one consolation. Producers can be confident they will lose less in February than in January... because it is a shorter month!

October 31

A lethal combination

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 € which closed on Friday worth 78.7p compared with 80.4p a week ago.

Those producers fortunate enough to have DAPP-related contracts should keep them locked away somewhere securely, but unfortunately there are very clear indications emerging in the market that some of the big players are looking to move away from DAPP based contracts to 50/50 versions which may include DAPP and a weekly factory price over which producers have no control.

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 313- 318/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 343.86/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 382/tonne compared with 3145/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 3 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 344.39/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 3 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 380/tonne compared with 3150/tonne a year ago.

The AHDB 30kg weaner average is now quoted at 344.93/head, but premiums of 32- 33/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.