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Very Little Hurts

by 5m Editor
21 February 2011, at 8:44am

UK - Ten years ago, we had the bad news that foot-and-mouth had struck and more bad news was dished out last week when, despite signs of tightening pig supplies and more interest from spot buyers, Tulip decided to cut its price by one penny.

This comes at a time when its base price, which tends to be the guide that others follow, has remained unchanged since its pre-Christmas drop of a similar amount.

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The Tulip shock drop comes at a time when retailers and processors are earning good margins and pig producers are reporting to be losing over £20 for every pig sold.

It is also difficult to understand why a reduction of one penny will encourage either consumers or retailers to take more of the British product, which at the commodity end of the market is now level-pegging with foreign imports, but it lumbers producers with yet more instant loss.

Thankfully all the other big players held their prices firm and although the spot market remains quiet, there were no reports of any lower spot quotes and some in fact moved up by a penny or two.

Pig numbers are continuing to tighten and all the signs are that we should see a price recovery in the weeks ahead. Failing this, many more producers will head for the exit. My phone has been busy with enquiries from people looking to sell up equipment and clear herds that are no longer financially viable.

Despite criticisms from some quarters, my suggestion that producers drop average weights has been generally well supported and is both simple and logical. Less is more and opportunities are now arising for producers to drop their weights by sending extra pigs, even if they do not like the idea of slowing down their growth rates.

The main reason for reducing pig weights is to allow producers to eke out scarce feed supplies brought at pre-increase prices, as well as their expensive replacement rations.

Or in simple terms, reduced supplies = increased demand = better prices = survival for a little longer.

Unfortunately the euro has eased a shade in value, ending the week down from 84.61p to 84.16p and this may have contributed to cull sow prices levelling out after several weeks of successive rises, albeit at very low levels.

Sellers with large loads were able to achieve up to 96p/kg on a delivered basis and collection centre delivery payments were around the 88p/kg mark.

Sow cullings remain at high levels, reflecting the effects of the feed price catastrophe facing the industry and on a more chilling note, reports are being received of much larger numbers of young sows and maiden gilts being slaughtered due to herd de-pops or cancelled gilt orders.

The weaner market also remains lacklustre to say the least with the latest Agriculture and Horticulture Development Board 30kg ex-farm average quoted at £41.25/head and widespread reports of weaner contract deals being renegotiated at much lower prices to avoid finishers racking up massive losses and trying to share some of this with their weaner pig suppliers.

On the feed price front, the recent removal of the £10/tonne export tariff has helped feed wheat prices to ease by a similar amount, but they are far too close to £200/tonne for comfort and forward positions still look eye-wateringly dear.

The reality is that unless producers receive prices at a minimum of 160p/kg, their financial losses will continue to soar and it is only a matter of time before the banks start pulling various plugs at a time when many producers are up a certain creek without anything resembling a paddle.

And finally it has been suggested we should re-name the "shout" price as the "Wimper" price.