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Are We Due a Wheat Price Correction?

by 5m Editor
4 January 2011, at 1:36am

UK - 2010 has ended with more of a whimper than a bang as far as the pig industry is concerned and the soaring cost of feed remains the main talking point, writes Peter Crichton in his Traffic Lights commentary.

This time last year wheat was worth 3101/tonne ex-farm and today this has doubled with reports of 3205/tonne being paid on a delivered basis, and more in places.

The DAPP has ended the year at 137.42p which is almost exactly where it started, but the euro which traded on Friday worth 86p is down from 89.6p in late December 2009.

Cull sow quotes have also drifted lower over the 12 month period, falling from 94p 12 months ago to little more than 90p today and with the demise of Barbers, producers now have only two main cull sow export abattoirs to sell to.

Because of high feed prices weaner producers have also taken a very big hit in their margins and the latest AHDB 30kg ex-farm weaner average of 341.69/head is almost 310/head down on its value a year ago.

To summarise, each of the index prices quoted above has moved in the wrong direction over the past year as far as pig producers are concerned.

Although 12 months ago producers’ margins were generally good, the industry as a whole will need to dig deep into any remaining reserves to survive through the first quarter of 2011.

The signs are that a reduction in European Union pig numbers coupled with better retail demand could see a significant improvement in 2011 pig prices, but this may come too late in the day for some producers who are already staring into a financial abyss especially if they have unhelpful bank managers.

Pig trading today remained both muted and underwhelming, but at least all of the big players held their weekly prices at stand-on levels and the DAPP actually moved up a shade to finish 2010 worth 137.42p.

It was however very difficult to find any significant space for spot baconers and where there were takers this proved to be much more of a buyers’ market than usual.

Spot bacon was generally traded around 135p for regular sellers with modest premiums available for lighter weights.

The industry faced a similar crisis three years ago when feed wheat nudged up to 3180/tonne, but by June most of this increase had evaporated and some of the more optimistic amongst us are hoping that we might see something of a correction in feed prices in the months ahead to come to the salvation of the industry as a whole.

However unless retailers and consumers can be persuaded to pay a fair and sustainable price for pigmeat that reflects much higher feed costs, it is inevitable that the words “going, going, gone“ will be echoing around a number of pig units in the year ahead.