Contract Prices Disappoint Sellers

by 5m Editor
22 August 2011, at 8:07am

UK - A very difficult and disappointing day for sellers as far as contract prices were concerned and at a time when most spot buyers were signalling they were likely to stand-on Tulip’s inexplicable decision to drop its contract price by 2p put several cats among the pig industry pigeons on Thursday night, writes Peter Crichton in his latest Traffic Lights commentary.

As a result the other big players followed the same downward track with Cranswick -2p to 143p, Vion a slightly less harsh 1.5p drop to 143.5p and Woodhead still well ahead of the rest but also easing by 2p to stand at 147p.

Here are this weeks places:

  1. Woodhead 147p - Rolls Royce
  2. Tulip 145p - Bentley
  3. Vion 143.5p - Ford
  4. Cranswick 143p - Lada
  5. Gill 142p - Bicycle

Spot buyers on the other hand were reporting that at the commercial end of the trade British prices are almost level pegging with imports and at least this has helped to put something of a bottom in the market which is another reason why there has been so much concern and comment about the Tulip decision to drop its price by such a margin.

Unfortunately this proves those cynics right who suggested when shout prices were introduced that they would gradually drift away from the DAPP rather than match it as had earlier been suggested in some quarters.

A difference of (say) 5p/kg between the DAPP and shout prices is worth a saving of up to 34/head to the buyer so no real surprise that so many of the big operators have moved in this direction at producers’ expense.

Spot bacon was mainly traded in the 140p–145p region and only a few opportunist buyers tried to operate at less than this. But with cereals at their current levels 140p still leaves many producers in the red rather than the black.

"After all the United Kingdom stockmarket turmoil during the week it was a relief to see the value of the euro close virtually unchanged on the week at 87.5p.

The cull sow sector however remains busy with some producers culling herds and relatively stable prices despite an easier euro with delivered quotes in the 106p region for those plants with better killing-out percentages and up to 109p where the spec is tighter.

Another black cloud overhanging the industry is in the weaner sector where the AHDB 30kg ex-farm price has fallen yet again to 343.04 and space remains very hard to find with most weaner buyers already full and others occupied with harvest, York races or suffering from nervous bank managers.

Looking ahead to the week after next we also have the problem of the late August Bank Holiday to cope with but with some plants reporting they will be killing on Monday this might mean we face less of a backlog than in recent years.

Grain prices are not doing the industry any favours either with buyers having to pay delivered prices of over 3160/tonne for feed wheat off the combine and the LIFFE wheat futures market tending firmer with November quoted at 3163/tonne and next July at 3170/tonne (ouch!).

In all sectors however a rapid return to profitability is what is needed if we are to avoid more producers heading for the exit door.