SPP Continues Remarkable 13-Month Rally

UK - The SPP has continued on its remarkable 13 month rally, which has seen it climb from the depths of 112p in March 2016 to its current position of 156.16p, following a further rise of .58p earlier in the week and spot bacon traded between 160p and 165p in the main, writes Peter Crichton in his "Traffic Lights" commentary for 28 April.
calendar icon 1 May 2017
clock icon 4 minute read

Abattoir weekly contribution prices have generally been anywhere between +1p and stand on and, although spot prices have remained strong with supplies very limited, a certain amount of resistance is creeping into the market which may, hopefully, only be a brief intermission in much the same way as some of us of a certain age have a short pause for breath on the landing before completing our trip to the bedroom...

With most of the major processors operating as normal despite the upcoming bank holiday, there were no signs of dreaded ‘pig roll over’ that often used to afflict holiday periods at times of low prices.

EU prices are continuing to reflect the Europe-wide shortage of pigs, with the influential German producer price up by a further 3 cents and now stands at 1.76 EUR, which in our money is the equivalent to 149p/kg and music to our ears compared with the situation 13 months ago.

A combination of rising German pigmeat prices as well as the slightly firmer Euro, which traded on Friday worth 84.47p compared with 83.78p 7 days earlier, helped to put another 2p into most cull sow bids which were traded within the 103p-105p range, but more could easily have been sold.

Weaner prices are continuing to soar, with the latest AHDB 30kg average up from £55.51 / head to £58.27 / head and 7kgs also moved ahead, rising from £38.81 / head to £40.81 / head.

The current shortage of pigs is fully reflected in the wide spread that has arisen between spot and contract weaner values, with reports of Red Tractor 30kg weaners now being traded at over £62 / head, in what remains very much a seller’s market.

UK futures prices have closed at generally similar levels, with May wheat quoted at £148.35/t, November at £138/t and May 2018 at £142.80/t.

UK spot feed wheat traded on an ex-farm basis at slightly easier levels, averaging £142.40/t, down by £2.30/t on the week.

Global grain markets also weakened during the week due to better growing weather and higher yield expectations in the US and Canada, as well as improved maize planting conditions.

UK protein prices have also eased to the benefit of pig producers, with 48 per cent soyameal ex-Liverpool slipping from £311/t to £298/t over the past 2 weeks, and 34 per cent rapemeal is also reflecting easier trends, dropping from £188/t to £183/t.

UK pig slaughterings have continued to fall during March and were down 5 per cent on the same month in 2016 following the contraction of the breeding herd during 2016.

And finally, ‘small is not always beautiful’, because it reduces the profile of the UK product in the whole pigmeat market and, according to recent reports, Asda and Tesco have significantly increased the volume of imported bacon and overall only 44 per cent of bacon sold by the top 10 retailers was British compared with 50 per cent twelve months earlier.

Hopefully, the current price rally will continue long enough to allow British producers to restock their units and invest in production facilities to meet the supply black hole which seems to be opening up but could easily be filled by imports with Brexit looming.

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