Peter Crichton’s commentary for August 15, 2014

As expected, it was another quiet day as far as buyers and sellers were concerned, with the DAPP continuing its downward drift and losing a further 0.28p to stand at 159.38p compared with 168.05p 12 months ago, but bear in mind that wheat was trading off the combine at £143/t compared with about £105/t today.

Pigmeat demand seems to be under pressure on all fronts with the Russian tit-for-tat politically motivated ban on European food imports, doing us no favours, and in the short- to medium-term there are no real signs of this coming to an end, with the result that European cold stores remain at or near full capacity.

Spot buyers were once again spoilt for choice with a larger number of UK contract pigs failing to find homes, with the result that spot bacon was traded at around the 150p mark.

Hopes are emerging, however, that once we get to mid-September, with the schools back and the holiday period over, we might see some stability into the market, but for the time being, supply continues to exceed demand to a significant degree.

A further slight recovery in the value of the euro, which traded on Friday worth 80.23p, has helped to maintain and in some cases, improve cull sow quotes with the two main buyers operating anywhere between stand on and +1p in places, with the result most culls were traded in the 90-93p range.

Weaner prices are continuing to reflect a severe shortage of finishing space, and although the latest AHDB 7kg average has held firm at £40.46p, 30kg prices have crashed by £4.33 for the week and now stand at £51.74p/head. It’s worth bearing in mind that, on the basis that the ‘hottest are the coldest’ spot quotes for weaners, which were riding ahead of contract prices, but have now slipped well below and will have a significant effect on the AHDB overall average, which reflects all reported weaner trades the previous week.

USDA forecasts for a record global wheat crop are continuing to put downward pressure on grain markets, with the result that ex-farm feed wheat trades last week were quoted at £109.50/t and the LIFFE futures market prices are also reflecting negative and bearish trends with November feed wheat quoted at £122.50/t and March 2015 £126.30/t, but this all should bring a smile to pig producers faces despite falling pigmeat values.

And finally, with the reign of the DAPP drawing to a close in October, contract sellers of weaners and finishers have been looking at other pricing methods that may be available. And although there are a whole host of different options being promoted, one that might find some favour is the thought that fixed-price finished pig contracts for say 4-6 months might be the way forward, providing these could be pitched at a level that guarantees producers a return, but at the same time allows the processors to sell to their customers on a similar back-to-back basis.

Many producers are, however, reluctant to return to shout prices even if these have a different name such as Contribution Price, and would prefer to have a mixture of spot and index contract prices used within an overall matrix, thereby reflecting the state of the market.

Hopefully, we’ll avoid using something as complicated as the Duckworth Lewis Method!

> 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

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