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Tulip Decides to Hold Shout Prices

by 5m Editor
17 October 2011, at 8:00am

UK - Hopes of a significant spot price rally fizzled out to some extent following Tulip's decision to hold (rather than increase) its shout price of 142p on Thursday night, writes Peter Crichton in his latest Traffic Lights commentary.



As a result some contract pigs were switched to the spot market, which meant it was not long before spot buyers had enough and did not need to put significantly more money on the table as had been previously hoped.

Although the DAPP took a small downward step, dropping by 0.40p to stand at 144.52p, earlier in the week indications were emerging that we could be looking at a mini price rally but for the reasons stated above this turned out not to be the case, although some spot buyers were still prepared to put a penny or two into their bids with others standing on with the result that spot quotes were generally slightly higher on the week, but not by the amount needed to nudge the DAPP in an upward direction.

Processors should not however take all the blame for the current situation which has not been helped by some of the larger retailers playing hardball and promising their customers they will be cheaper than their competitors (at the expense of the pig industry).

The underlying weakness of the shout price system remains a major talking point and leading producers have pointed out that whilst they have no problem with sending pigs on a contracted basis (which they cannot withdraw from for between 6-12 months), there needs to be some third party element in the price such as the DAPP because what we currently have with the shout price system is the opportunity for the big processors to receive contract supplies on a spot price, i.e. the best of both worlds.

Smaller wholesalers are also reporting indifferent high street demand which has not helped with the major supermarkets having yet more domination over the whole retail meat sector.

As a result spot bacon was generally traded in the 145p–147p range with small premiums available for lighter pigs but nothing exciting and the underwhelming contract price league table now reads as follows:

  1. (as always) 145p Woodhead
  2. 142p Cranswick, Tulip

Last 141p Vion

The relative strength of the euro which closed on Friday worth 87.63p is at least keeping up the cost of imported pigmeat and at the same time providing a stable base for cull sow export quotes, which have remained this week in the 108p–111p range according to specification. With large sows now capable of realising up to 3200 per head gilt replacement is a less painful task than before, although allowing for the current state of the industry there are still several producers questioning whether this is the right thing to be doing?

Weaner prices have also stopped falling and the latest Agriculture and Horticulture Development Board 30kg ex-farm quote of 340.04/head represents a very slight recovery, but with a long way to go before producers get back into the black.

But recent falls in feed prices have stopped and forward LIFFE prices were up by 31.30/ 32.30/tonne for November/January.

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