Rising Costs + Falling Demand = Misery

by 5m Editor
20 June 2011, at 10:20am

UK - The underlying problem for pig producers is that the average consumer has less money to spend, writes Peter Crichton in his Traffic Lights commentary for Friday, 17 June.

Another underwhelming day for sellers in all sectors and although the DAPP put on a further 0.58p to stand at 151.38p which is its highest level this year, it was no surprise when in response to lacklustre retail demand Tulip stood on with their shout price at 152p and (surprise, surprise) Cranswick, Vion and Woodhead followed suit.

Whilst it is easy to blame abattoirs and retailers for the lacklustre prices producers are receiving when compared with soaring feed costs, the underlying problem seems to be that the average United Kingdom consumer has less money to spend in the high street and those of us who studied economics will remember the simple formula that rising CoP + Falling Demand = Misery.

Better and more positive promotion of United Kingdom pig meat when compared with lower welfare imports would help no end, but this is a drum many of us have been beating for years and will have to continue to do so for a while longer.

As a result, spot bacon quotes were anywhere between an uneasy stand-on to -4p, depending on region and specification within a 155p–160p range and there was not much sparkle from the smaller wholesalers looking for lighter cutter weight pigs either.

Recent news reports of a lack of confidence in the Euro caused by the financial problems being faced in the PIGS countries (Portugal, Ireland, Greece and Spain) have not yet filtered through to the financial markets where the Euro closed virtually unchanged worth 88.53p.

Cull sow quotes dropped a shade probably anticipating an easing in the value of the Euro in the week ahead with most quotes ranging between 96p and 100p per kg and difficult to get more than this.

Recent falls in the weaner market helped to some extent by a partial end to the recent drought (which is what always happens when the government announces a hosepipe ban, so why didn't they do it sooner?) have eased some of the pressure on feed markets and over the past week wheat futures have fallen by just over £5 per tonne, but July is still quoted at £177 per tonne and May 2012 values of £179 are painting an expensive picture for next year.

Weaner prices continued to reflect uncertainties over finished pig values in three months ahead with the result that the Agriculture and Horticulture Development Board 30-kg ex-farm average has remained virtually unchanged at £45.76 per head and 7-kg pigs have been trading in the £30 per head region with modest premiums available for Freedom Food.

The main worry facing the industry at present is that for those who follow trends a quick glance at the price graph on the NPA prices web site reveals that prices tend to peak in June and then decline for the remainder of the summer and autumn.

If this pattern is repeated in 2012 more herds will be culled leaving retailers, processors and consumers with an even smaller United Kingdom supply base and so 'use it or lose it' may become more of a reality than a threat.