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Rising Cereal Costs a Big Talking Point

by 5m Editor
7 August 2010, at 7:22am

UK - Although pig prices are normally the headline feature of this commentary, on this occasion the soaring cost of feed cereals is the big talking point, writes Peter Crichton in his Traffic Lights commentary for 6 August.

Off-the-combine prices (if it is not raining) of 3155- 3160 delivered are available for sellers in East Anglia with forward prices of circa 3165/tonne for November rising by a further 310 to 3175/tonne for March next year.

Soya is trading at slightly more moderate levels with quotes in the 3275- 3285 region available, but the cost of compound feeds is already shooting up and even the cheapest home-mix finisher ration is going to cost close to 3200 a tonne.

Much higher pig production costs are not limited to British producers and the same problem is being faced across Europe and beyond.

Unless retailers can be persuaded to pay producers a price that will allow them to stay in business it is inevitable that some will be forced to quit, especially in Europe where they have not had the benefit of a couple of reasonably good years to build up a fighting fund.

The Catch 22 is that if pig producers receive a price that matches much higher costs of production this will put up the cost of pigmeat and could hit demand with consumers switching to cheaper alternatives, although the chicken industry which normally challenges pigs head-on will be facing even steeper rises in production cost because feed forms a bigger percentage of its overall cost of production.

Those readers with long memories might remember the following extract from my report on 14 May 2010.

Cereal market price watchers will also be aware that prices have continued to creep up with ex-farm feed wheat worth close to 3100/t and now might be the time for forward thinking producers to get some more cover.

Although slaughter pigs were cleared reasonably well for next week, demand remains fickle with the DAPP taking a further downward step to 145.55p and the Tulip base price also dropping by 1p to 143p.

As a result spot buyers were spoilt for choice and quotes as low as 138p were heard for bacon in some sectors, but warmer hearted buyers were generally prepared to give 140p and a touch more in places.

With the much-feared August Bank Holiday not too far away the advice to producers is to keep on top of their numbers wherever possible because with feed prices where they are, holding pigs to heavier weights will prove to be more expensive than usual.

Cull sow prices have continued to maintain recent values with reports of an extra copper available to those sellers who were prepared to haggle, but still a fairly wide range of quotes depending on load size and specification and these were anywhere between 95–100p.

The weaner market has separated into the haves and have-nots, and those sellers with binding DAPP-related contracts are still receiving prices around the latest Agriculture and Horticulture Development Board 30kg ex-farm average of 350.62/head.

The spot weaner market however has fallen sharply because of concerns over feed prices and indifferent finished pig returns with the result that some spot 30kg weaners are now trading at a 33- 35 discount when compared with contract.

Difficult times ahead, especially for those who remember the double whammy that occurred three years ago which not only saw sharply rising feed prices, but we were also hit with the August 2007 outbreak of foot-and-mouth which managed to "escape" from Pirbright, which heralded all sorts of problems for the livestock sector as a whole.

Hopefully lightning will only strike once and not twice on this occasion.