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Processors Under Pressure

by 5m Editor
15 August 2009, at 8:13am

According to Peter Crichton, although some of us can be quick to blame abattoirs for dropping prices, a longer harder look at the processing and retail sector comes up with some of the reasons why prices are easing despite supplies remaining fairly tight.

Retailers are in strong competition with each other with strap lines such as “every little helps“ and other references to how much cheaper they are than their competitors.

In order to preserve their margins retailers find it easier to pay less rather than charge more and it is the primary producer (the pig farmer) who is paying the price for this.

We are also faced with the situation where “less is less“ rather than “less is more“. There are now just four large mainstream supermarkets: Tesco, Morrisons, Asda and Sainsbury’s. Most of their fresh United Kingdom pork is supplied by just four large slaughterers: Vion, Tulip, Cranswick and Woodhead.

As a result if just one big retailer cuts its orders or prices by a few percent this has a major effect on both values and supplies.

This week has seen all the big players in the slaughtering sector keeping contract numbers tight with some pigs being rolled and spot buyers sticking to regulars only.

With the upcoming bank holiday a couple of weeks away it may take a couple of weeks into September before the weights and numbers go down, the schools are back and we can hope for more of a seller’s market to emerge.

The DAPP took its first significant downward step this week falling by 0.67p to 154.42p and the signs are that this pattern may be repeated again in the weeks ahead, especially if weights and probes continue to rise due to reduced slaughterings.

Spot prices today tended to be circa 140p for heavies on a 14 probe with up to 144p available on a slightly tighter spec. This is by no means a disaster for mid August and other positive signs were that some of the smaller fresh meat wholesalers were looking for slightly better numbers at a time when beef and lamb have both moved up in value.

Another positive factor is that the value of sterling has eased very slightly and the euro closed worth 86.1p on Friday compared with 85.6p a week ago.

Despite falling pig prices cull sow values are holding firm with smaller lots traded at 112p and big loads worth 116p-plus in some regions.

The weaner market is certainly feeling the effect of easier finished pig prices, partly due to the fact that quite a few spot weaner buyers are also selling onto the spot finished pig market, which has seen returns dip by circa 310/pig since early summer.

As a general rule 30kg spot weaner prices tended to be in the 354- 356/head range, but contract quotes more closely related to the DAPP were 32- 34 ahead of this with premiums also available for Freedom Food weaners.