Peter Crichton’s commentary for February 27, 2015

The wide gap between spot and contract prices has narrowed significantly with the news that spot bacon buyers were prepared to pay in the region of 120-122p/kg for one-off spare loads, which compares with prices of anywhere between 6-10p/kg less than this a week ago.

Although contract prices tied to the SPP or other index reference prices have continued to fall with the latest SPP down to 133.95p, a revival in spot prices should help to feed through to the SPP in the weeks ahead.

News from Europe, however, is not universally good, despite the recent introduction of private storage aid, which takes some of the financial pressure off storing some large volumes of unsold meat. Unfortunately the Euro continues to move in the wrong direction. This has been caused by the ongoing financial turmoil in Greece, with the result that the euro traded on Friday worth 72.7p compared with 73.56p a week ago and 74p on Valentine’s Day. In two weeks, we’ve seen the value of the euro drop almost 2%.

This means that pigmeat importers have received a 2% competitive advantage in the past 14 days and unfortunately our exports, which mainly comprise cull sows and fifth quarter, have fallen in value by a similar amount.

Cull sow prices have always provided a ready barometer of the health (or otherwise) of the European mainland pigmeat industry, and had it not been for a fall in the value of the currency, we might have seen a rise of 1-2p/kg today, but the two main cull sow export buyers were operating in stand-on mode between 62-64p/kg, in the main because of the weakness of the euro.

Weaner prices have, however, started to perk up to some extent with the latest AHBD 30kg ex-farm weaner average rising from £44.42/head to £46.03/head and 7kg weaners have gone up by a modest 20p/head to £33.41/head.

With grain prices still in retreat, now might be a good time for buyers with reasonably strong nerves to get stuck into the spot weaner market, because if finished pig prices follow their normal seasonal trend, there could be a margin to be earned – we’ll see.

Turning to grain prices, the latest published spot ex-farm wheat price has slipped to £114/t, although it’s quite hard to find much at that level. Futures prices are also in retreat, with March feed wheat quoted on the LIFFE market at £116.15/t and July at £119.05/t.

And finally, good news that, despite all the cheap pork slushing around the UK, the majority of our retailers are keeping their earlier Horsegate promises and sourcing British product. Bouquets to Aldi, the Co-op, M&S, Sainsburys, Morrisons and Waitrose who are maintaining 100% British pork, but brickbats to Lidl and Tesco who have not.

Without the UK premium, however, most pig producers would be in the red or bankrupt, and with estimated COP levels at 135-140p/kg, several are already in negative territory and even falling feed prices may not come soon enough to keep bank managers at bay, unless we see a further rapid increase in pig prices. This could be helped by the upcoming “pulled pork” promotion that, according to BPEX director Mick Sloyan, will also help push the welfare message.

Unfortunately, we also have to compete with the BOGOF message, which is a fairly powerful incentive for consumers trying to save money on their shopping bills.

> 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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