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We May be Near the Bottom Now

by 5m Editor
31 January 2011, at 9:16am

UK - Although as forecast the spot market was a chilly environment for sellers, contract sellers enjoyed a slightly warmer setting helped by the fact that followed by Tulip's lead none of the other big players wanted to be picked out for dropping their base prices and they all stood-on with Woodhead still leading the field at 139p, Tulip at 136p (including level delivery bonus), Cranswick at 134p and Vion bringing up the rear at 133p, writes Peter Crichton.

Although DAPP slipped from 137.55p to 136.73p, with the exception of Woodhead this is still higher than all of the other contract base prices mentioned.

Because of indifferent retail demand and plenty of cheap pigmeat heading this way from Europe, spot buyers were spoilt for choice and unless you were a regular, space was very limited. Some sellers were forced to accept rock-bottom prices as low as 120p.

Generally however a gap has opened up of around about 10p per kilo between regular spot and contract prices which is equivalent to a difference of around 38 per head and yet another reason to have contracts in place.

Freedom Food pigs and other specials however continue to obtain modest premiums, but with feed prices at current levels, the general consensus is that most farrow-to-finish operators have breakeven prices in the region of 150p, so apart from those producers with feed cover almost the entire industry is trading at a whopping loss.

There are however some signs that we may be at, or close to the bottom of this particular trough and the sow market has always provided a ready barometer of what lies ahead in Europe.

Cull sow quotes moved up between 3p–5p today and although they still have a long way to go, quotes in the 83p–85p/kg region were available on a delivered basis or 4p–5p below this to collection centres or ex-farm.

The recent introduction of Aids to Private Storage and the relatively firm performance of the euro which closed on Friday worth 85.9p have all signaled that something of a price revival may be ahead, but it could be a case of too little, too late.

Private storage aid will allow surplus pigmeat to be taken off the European market and put in store and to come out again in either 90, 120 or 150 days time, but only qualifies for aid if it is then exported outside the European Union, ie. the further away the better!

The latest Agriculture and Horticulture Development Board 30kg ex-farm weaner price has also held relatively firm at 342.16/head and there are some reports that weaner supplies in the weeks ahead may be less plentiful, which could also point to an upcoming shortage of pigmeat throughout the system.

For those producers looking to cut their feed costs, a short term opportunity exists in East Anglia and other sugar beet growing areas where frost damaged beet is available at little more than the delivery cost in extraordinary large quantities.

With a 20 per cent DM, 6.8 per cent crude protein and energy TDN at 81 per cent, subject to nutritional advice, this is well worth a look for breeding herds. More details to follow next week.