Producers Will Switch Pigs to Spot as Shout-v-Spot Gap Widens

19 November 2012, at 9:01am

UK - Although pig prices have remained firm with slight increases in places, they are still well adrift of soaring feed costs which continue to power ahead at unaffordable levels, writes Peter Crichton.

Although the DAPP put on another 0.5p and now stands at 159.96p, Tulip and the other four shout price abattoirs all decided to stand-on and the league table remains as follows:

163p Woodhead
160p Gill
159p Tulip and Vion
158p Cranswick.

With larger numbers of pigs being sold on contract pickings were scarce for spot buyers who in some cases had to consider putting an extra penny or so more on the table and as a result spot bacon mainly traded in the 162p–164p range according to spec, but all pigs are sold with nothing rolled.

As the gap between spot and contract prices continues to widen some contract sellers may be tempted to switch to the spot market and who can blame them at a time when margins are still in the red?

With the prospect of colder weather over the weekend growth rates may be affected and if this coincides with better retail demand, prices could move further ahead.

Another positive was a slight improvement in the value of the euro which traded on Friday worth 80.14p compared with 79.0p a week earlier.

As a result cull sow prices have continued to maintain recent values and in some cases there were slight increases with most traded in the 116p–118p range according to spec, but there are reports of large numbers still being culled, mainly due to the overall unprofitability of pig production.

Weaner prices are also continuing to improve, reflecting a further shortage in the supply chain with the latest AHDB 30kg ex-farm weaner average quoted at 344.60/head with some spot trades 32- 34 ahead of this. More demand is also being experienced for 7kg pigs, which are now changing hands in the 332- 334/head region with premiums available for Freedom Food.

Feed prices remain bullish with ex-farm wheat quoted at around 3210/t and LIFFE futures prices of 3217/t for November and 3220.50/t for next May.

Reports are also being received of some crop yield reductions in the southern hemisphere as well as significant crop establishment problems due to wet weather in parts of northern Europe, all of which paints a fairly bleak picture for pig feed prices in the year ahead.

Any CoP link with feed prices is well worth looking at providing this does not put a lid on the opportunity for producers to benefit from soaring spot pig prices to try and clawback some of the loses that have been suffered over the past year.

This is why Tesco's CoP proposals will be scrutinised with great interest by the industry as a whole, but careful thinking is needed before any final decisions are made to ensure that sellers will benefit from the upcoming pig shortage rather than just be able to break even, which is not the answer for pig producers looking to reinvest in worn-out facilities.