Small Increase in Demand Could Spark Price Rises

by 5m Editor
28 February 2011, at 7:03am

UK - Finally the pendulum is starting to swing (but very slowly) in the producers' favour with reports of some slight increases in spot pig prices coupled with a modest reduction in the cost of feed wheat, Peter Crichton writes in his latest Traffic Lights commentary.

For the first time for many weeks the DAPP has stopped falling and held virtually unchanged at 135.06p and all of the big four abattoirs thankfully held their shout prices at similar levels.

Live pig supplies are also tending to tighten with no reports of any pigs being rolled and all the signs are that even a slight recovery in retail demand could spark off some fairly significant price rises in the weeks ahead.

As a result most spot bacon was traded at no less than 128p and prices on the top side of 130p from some of the warmer hearted buyers were heard later in the day.

Although it is easy to criticise processors for trying to improve their margins often at the producer's expense, on the other side of the coin the facts are that pigmeat stocks are still running at relatively high levels and need to be absorbed before any real recovery can take place.

On the negative side however reports of the upcoming termination of the Aids to Private Storage Scheme has put downward pressure on European pigmeat prices at a time when we were all hoping they might continue to improve.

A recent mini-rally in the value of the euro has however helped to marginally increase the cost of imports with the euro rising from 84.16p last Friday to 85.59p today.

Cull sow prices unfortunately took a downward step of between 2p–4p caused mainly by overflowing German cold stores and this will certainly come as bad news to a rising number of producers who are either de-stocking their herds or cutting back on numbers as well as canceling gilt orders.

Shrewd sellers with large loads of sows were still able to negotiate prices a shade above 90p/kg on a delivered basis, but collection centre prices have drifted back to the 83p–87p range and with plenty of culls on offer, there was no need for either of the two main players to go out on a limb to secure extra numbers.

The weaner market continues to reflect the very high cost of rearing and finishing rations with reports of 30kg pigs being regularly traded below 340/head and 7kg piglets 312- 314 below this, although Freedom Food progeny continue to earn modest premiums. The AHDB 30kg weaner average has eased to 340.98/head.

Hopefully all the hard work put into the 3 March Downing Street Rally by the NPA will pay off and we can all have a collective moan and also reflect on the number of banners we saw on the way there! "I spy with my little eye something beginning with B".

Despite the reported numbers of people going out of pigs there is still a long term shortage of suitable pig rearing and finishing accommodation, partly due to older units wearing out also being caused by more attractive diversification projects on farms, i.e. making money by residential/industrial use rather than losing it keeping pigs.

For those of you however with long memories, although 2001 marked the catastrophic foot and mouth disease outbreak which occurred just over ten years ago, some may remember that was also the start of the Pig Outgoers Scheme.

For those producers who took the Queen's shilling and decommissioned their units it is worth remembering this was only for a ten-year period and so there is nothing to stop mothballed or closed units being reopened ten years after their closure date.

But I am still struggling to think that there will be many units that could be potentially more valuable being used for pig production rather than being left empty!