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Sellers Struggle with Static Pig Values, Rising Feed Costs

6 August 2012, at 8:57am

UK - There was another disappointing but unsurprising day for sellers on Friday (3 August), who are continuing to grapple with the problem of soaring feed prices and static pig values, writes Peter Crichton.

DAPP moved down a touch to 150.43p, although it was encouraging to note that the weights and probes of pigs included in the sample are also starting to drop. All of the major shout price abattoirs took their cue from Tulip which stood-on at 149p with the result that the medals table remains unaltered as follows:

Gold 152p Woodhead, Silver 150p Gill, Bronze 149p Tulip, Lead 147p Vion and Cranswick.

Spot demand also remained quiet due to an oversupply of loins and generally dull retail demand with the result that 152p was quite hard to get except for lighter baconers with most spot bacon traded in the 148p–150p range.

In any event spot and contract pigs are probably 20p/kg ( 315/pig) lower than break-even and reports of rising numbers of cull sows being slaughtered should come as no surprise as many producers find themselves in an impossible financial situation.

On a positive note mainland European pig prices have been trending firmer with Germany moving ahead by around 10p/kg over the past two weeks and slightly firmer cull sow prices may also be pointing to something of a European price revival, but so far this is only a very small step rather than leap forwards.

Cull sow quotes moved up by 1p–2p in the main with most quotes between 109p and 111p according to region and specification or 107p on a collected basis.

Despite all of the financial concerns faced by some eurozone countries the euro actually gained in value this week and traded on Friday at 79.12p compared with 78.68p seven days ago.

Spiraling feed prices continue to do their worst across the board but they are in particular hitting weaner producers who are now faced with the AHDB 30kg ex-farm weaner average falling below 340/head for the first time for years at 339.98/head and spot 7kg pigs are trading as low as 325/head in some regions, but bearing in mind that it costs 320 to rear them from 7kg to 30kg this should come as no surprise, but once again it is the primary producer who is bearing the brunt of the loss.

Reports of ongoing drought conditions in Russia and the United States are doing nothing to help on the feed price front and although soya has eased a shade, it is still traded at around 3440/tonne compared with 3270/tonne a year ago.

LIFFE wheat futures remain bullish with November quoted at 3189.50/tonne and distant March–May 2013 prices also firm in the 3192- 3195 range.

Basic maths determine that unless the gap between production costs and revenues can be reduced it is inevitable that many producers will be slaughtering sows and by next spring we could see a big black hole in the British supply chain, which will (no doubt) be filled by cheaper European pigmeat.

Several producers have suggested that a return to CoP contracts is probably the only way that we will be able to maintain our industry in the future, but there is little chance of many of the mainstream retailers who are caught up in their own internal price wars agreeing to anything along these lines, so this may well be a case of "use it or lose it".

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