Peter Crichton’s commentary for April 25, 2014

It was a firm, but unspectacular day for sellers, with supply and demand (almost) in perfect balance, with the result that spot quotes were generally at stand-on levels, although most contract prices recorded a slight upward tilt due to a rising DAPP, which put on 0.43p to stand at 163.71p, which seems to be lagging around 2p behind the recently created APP.

For those who need reminding, the APP is based on prices submitted by sellers, whereas the DAPP relates to data provided by some, but not all buyers, so you can draw your own conclusions as to what extent below the line and other bonus payments aren’t included in some DAPP returns!

In general terms, contract bacon was tending to work out at between 165-167p/kg for Red Tractor pigs, whereas spot sellers are still enjoying something of a premium with quotes today in 168-170p/kg range, although some spot buyers were becoming very price sensitive as their customers are being tempted by significantly cheaper imported pigmeat.

One significant feature of the market has been the lack of any pigs being rolled, despite the recent and upcoming bank holidays.

Cull sow prices have held at firm but modest levels, with most quotes in the 98-100p/kg range and the euro ended the week virtually unchanged, trading at 82.31p.

Weaner prices are continuing to maintain recent values, and although the latest AHDB 7kg average has dropped a shade to £39.80p, 30kg prices have gone up by £2/head and now stands at £57.75p

However, rising feed costs could take the edge off finishers’ margins in the months ahead, and although midweek feed wheat prices were a shade easier on an ex-farm spot basis at £163.02, but at the end of the week the bulls were sniffing around the futures markets where LIFFE May wheat rose to £170/t and November is also firmer at £159/t.

This is due to a number of factors, including further reports of dry weather conditions in the US, as well as the ongoing internal conflict in the Ukraine. Recent rainfall across parts of Europe and in the UK might help to take the edge off feed wheat values in the weeks ahead, but there are reports that the El Nino effect may pose potential risks for the Australian wheat crop.

Recent press reports of the spread of fungal disease such as wheat rust may also unsettle the market unless further resistant varieties can be developed by plant breeders.

It’s worth remembering that the 1950s wheat rust epidemic that swept across North America destroyed up to 40% of the crop and a virulent mutation of the fungus could have devastating effects if unchecked.

Simon Davies of MQL has made an interesting suggestion on the NPA website to ensure that the calculation of price matrix contracts remain simple and transparent and could possibly be linked to a FVPP (Final Value Pig Price) with the producer pig price tied to a proportion of the final retail value of a pig. It’s well worth further consideration, but we also need to ensure that the various index prices currently published, which include the DAPP (RIP in October), the APP (provided by sellers) and the SPP (which has yet to get underway due to insufficient price information being provided by all of the processers), are all based upon total prices paid for slaughter pigs without below-the-line and stealth payments which, up to now, haven’t always been included in the overall processor price returns.

In short, it would be good to try and avoid ending up with a “Craftily Renegotiated Average Price”.

And finally, for those of you who want a day out in Essex tomorrow, don’t forget my dispersal auction of indoor kit for WH Norris & Son, who have decided to close down their 350 sow farrow to finish unit after 65 years in the business. Over 400 lots will come under the hammer, including two Finrone 16-crate farrowing containers, Trowbridge sectional pig finishing pens and hoppers, drinkers, bulk bins and plenty of other goodies!

See www.petercrichton.co.uk to download the catalogue.

> 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.

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