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Major Players May Try to Tinker with DAPP

by 5m Editor
3 October 2009, at 2:34pm

UK - Although contract sellers still have surprised smiles on their faces following the slight upward move in the DAPP which, defying gravity, went from 149.49p to 149.66p, the going was much stickier for those providing the spot market, writes Peter Crichton in this week's Traffic Lights commentary.

Signs are also emerging that more of the larger abattoirs are also seeking to move away from the DAPP because of the large gap that is opening up between contract and spot prices.

Most of the meat trade have always had something of a friend or foe relationship with the DAPP and unfortunately at present this is very much in the latter category.

The main problem is that a large proportion of the DAPP feeds off itself and it takes a long time for any correction to follow through from the spot market, which now forms such a small part of the overall sample.

It would however be most unfortunate for the industry as a whole if more of the major players moved away from this index price, especially as this is also one of the main mechanisms for arriving at weaner values, or try to exclude any of their bid prices from their DAPP returns.

The main blame for recent falls in pig prices seems to rest with the larger retailers who are switching to rising volumes of imported pigmeat despite the relatively high value of the euro rather than stepping up promotion of welfare friendly “born in Britain“ pigmeat.

Because of falling retail orders due to the influx of imported pigmeat, most of the major British abattoirs have had to cut back slaughtering numbers creating a significant backlog in the system at a time of year when demand normally improves.

Rising weights means fatter pigs and this will ultimately filter through to lower prices and bring down the DAPP, but in the meantime the problem remains for those producers looking to offload surplus pigs onto the spot market where very little space exists.

As a result most of the spot bacon quotes were in the 136–140p range, although one or two prices of below 135p were heard later in the day.

Cull sow prices continue to remain firm despite falling European values helped to some extent by the strength of the euro which closed on Friday worth 91.9p and within a gnat’s bite of last week’s position.

With a nationwide shortage of replacement breeding gilts some producers are tending to keep sows for an extra parity and as a result slaughter numbers are tight with a UK weekly cull sow average of little more than 3,500/week.

Strong competition for reduced numbers of sows keeps our prices ahead of equivalent European values and most quotes today were in the 116p region with premiums available for large loads and any sows at less than 114p, except in very small quantities, were undersold.

The weaner market continues to reflect uncertainty over finished pig prices and unless these rally between now and Christmas, there is no real prospect of weaner prices taking an upward lift until next spring.

The latest AHDB 30kg ex-farm weaner price now stands at 352.81/head compared with spot trades touching around 360.00/head during the summer.

For the glass half full brigade however the price of feed wheat remains very much in pig producer’s favour when compared with their arable cousins, but if the current dry spell continues plantings may be significantly affected for next year’s harvest.