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We're Paying the Price Now

by 5m Editor
17 October 2009, at 7:52am

UK - We are now starting to pay the price for the halcyon days of spring and early summer when United Kingdom pig prices soared above European levels, writes Peter Crichton in his Traffic Lights commentary.

Unfortunately the higher they are the harder they fall and by August some retailers were realising that if they kept promoting the United Kingdom product in the face of much cheaper imports their margins would shrink and they could make even more money by switching to larger supplies of imports at the expense of United Kingdom producers.

The situation we are now faced with is that because of reduced retail orders United Kingdom abattoirs are cutting back on pig numbers leaving a larger surplus of spot pigs looking for homes at a time of year when supplies also tend to increase.

The picture may not however be as bleak as this because several of the larger marketing groups are reporting that their forward forecasts are indicating a reduction in supplies when we enter November and if this is coupled with the colder weather, this could slow down growth rates and stimulate retail demand.

When this happens this should help to arrest the falling DAPP, which a year ago was quoted at 136.51p almost neck and neck with spot rather than the 15p differential that now exists.

Spot bacon today was traded at a base price of circa 130p and other outlets were prepared to pay a copper or two more than this, but space still remains very tight. Contract sellers tied to the DAPP still have a base price of 147.54p as a safety net.

Lighter cutter weight pigs continue to sell marginally better and with Christmas approaching producers are advised to keep on top of their numbers and perhaps start selling some lighter weights to avoid another bottleneck over the festive period.

A marginal improvement in the value of sterling has done nothing to help on the trading front which saw the euro slip from 92.6p a week ago to 91.0p on Friday, but still well ahead of earlier levels.

Reports of difficult trading conditions in the European mainland pig market have also put more downward pressure on United Kingdom cull sow quotes which have today been generally between 108p and 113p, but a general shortage of slaughter numbers has kept this market slightly firmer than expected.

Weaner prices are continuing to head south with the latest AHDB 30kg ex-farm quote now standing at 350.32/head, down by almost 37 since June.

Providing feed prices stay at current levels there is still a margin for weaner buyers and sellers alike.

We may however have to wait until the early spring next year before any significant rally is seen in the finished pig market, but what most sellers are hoping for is a period of stability to settle the market down rather than seeing further fluctuations between now and the end of the year.