Peter Crichton’s commentary for June 26, 2015

It was a difficult day for sellers, coinciding with the “Wimbledon and strawberries” season, that often seems to be the time when prices start to feel the pressure, although this has, unfortunately, been the case for much of the year in 2015.

Although the SPP put on 0.48p and now stands at 132.38p, this trend was not reflected on the spot market where spot bacon generally traded at or around 130-134p/kg according to spec.

Weekly announced contract prices have generally held at similar levels, but the news that German prices were about 8c lower has done nothing to improve market sentiment.

Probably the biggest disappointment in the whole sector today has been the crash in cull sow prices, which lost another 5-6p/kg today, meaning that cull sow values are now almost 50% of their level a year ago. With an average cull sow weighing 140kg, their per-head value has dropped from £140 to £70, not helped by an ongoing weak euro which traded on Friday worth 71.07p.

This price collapse flags up a £27 million black hole in the balance sheets of UK pig farmers, based on the current 390,000 head domestic pig breeding herd.

Unfortunately, those producers who can no-longer afford to stay in the business are between a rock and a hard place because, in most cases, their overdrafts will exceed the value of their herds once culled.

Retailers who claim to support UK farmers need reminding that without significant premiums many will be unable to continue to provide UK welfare friendly pigmeat at a loss.

The picture as far as weaner producers is concerned is not much better, with the latest AHDB 30kg average slipping to £44.08/head, although 7kg prices have staged a modest rally, rising to £33.12/head.

Finishers will soon be busy with harvest and straw carting, which is often a difficult time to sell weaners and might be a good occasion for those buyers with strong nerves and bank balances to dip into the spot weaner market and have some finishers ready to sell in the autumn?

However, rising feed prices may put a lid on the viability of this suggestion as, at the time of writing this report, July wheat on the LIFFE market has moved ahead by £2.70/t to £113.75/t and November was trading up £2.20/t at £127.75/t. The main reasons for this spike are weather related, with forecasts of much dryer weather across wide areas of Northern Europe and too much rain in the grain belt areas of the US.

And finally, reports that Moscow intends to extend its ban on European food imports for a further 12 months will continue to add downward pressure to worldwide pig prices affecting Europe in particular, and shades of the Cold War are returning in Europe, with claims that the export bans are not political, but are for animal health and biosecurity reasons… we shall see!

This comes at a time when European cold stores are full and, according to the NPA, contain the equivalent of almost 800,000 live pigs that are being held under the EU Pigmeat Storage Scheme. This product will soon be moving out of the cold stores and into the market, adding further volume at a time when larger worldwide supplies of pigmeat are also becoming available, in particular due to the recovery of the US herd from PEDv.

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About The Author

Based in Suffolk, Peter Crichton provides a wide range of valuation, auction and livestock marketing services, as well as supplying the UK pig industry with a wide range of consultancy services covering tenancy, contract advice, pig equipment and herd valuations as well as dispute resolution. For more information visit: www.petercrichton.co.uk