Peter Crichton’s commentary for January 10, 2014

In horseracing terms, sellers were faced with fairly heavy going on Friday with a falling DAPP – which now stands at 168.89p, down by 1.04p on the previous week – that will also have a downward pull on contract quotes as well as much less demand from spot buyers due to generally indifferent pigmeat sales at a time when the nation often carries out some collective belt tightening following the Christmas period and the arrival of credit card bills on the doormat.

Spot bacon sellers were faced with a fairly wide range of prices and those who were shrewd enough to place their pigs on Thursday were able to achieve prices in the 167-169p/kg range, but by Friday afternoon some spot prices as low as 160p/kg were available, although it is unclear if any sellers were forced to trade as low as this. In general terms, spot prices for next week averaged circa 165p/kg.

Gills dropped its weekly price to 168p/kg, but those sellers on DAPP-plus contracts probably faired better than most.

The main problem facing the industry at present is the yawning gap between EU mainland and UK pig prices, which has led to a differentiation of up to 40p/kg on the wholesale markets making imported pigmeat a very attractive option as far as retailers are concerned, especially on the back of some poor trading results from Tesco and Morrison’s, although M&S, Aldi and Netto faired better and these firms have also incidentally been stalwart supporters of UK-produced pigmeat, which must prove a point.

Sow values have also remained under pressure and although the euro traded on Friday at 82.78p, which is almost identical with its value seven days earlier, cull sow abattoirs generally reduced their bids by around 2p/kg with trading reported in the 96-100p/kg range on a delivered basis.

Weaner values have also shown an easier trend reflecting concern over finished pig values in the weeks ahead, with the latest AHDB 30kg ex-farm weaner average quoted at £54.26/head and 7kg weaners at £42.76/head.

Feed prices have continued to show a bearish trend with ex-farm wheat slipping to £156.60/t and futures quotes also showing more affordable prices in the months ahead with March wheat at £157.15/t and November at £147.50/t.

On the subject of the DAPP, there has been much debate over reports that one of the major players might pull out from contributing, but at the time this report was prepared BPEX sources had confirmed that all of the existing participants’ price data had been included in the latest DAPP.

BPEX has also confirmed that if any of the existing price contributors decide to withdraw from submitting their returns they will be indentified on the BPEX website and that there is also a statutory requirement for accurate pig prices to be submitted to Brussels on a regular basis, which is another reason why the maintenance of the DAPP is absolutely essential to the benefit of all players in the industry, not just producers.

The DAPP not only provides accurate finished pig price data, but is also instrumental in most weaner contracts as well as often being used as a benchmark for pig unit rents, bonus payments and so on.

Although processors are complaining with some justification that currently the DAPP is too high when compared with the value of imported pigmeat, UK pig producers need a premium to justify the much higher welfare associated costs with our system of production. It would also be disappointing if any of the major players that depend upon the industry for their livelihood decided to no longer participate in the provision of price data, but any index price such as the DAPP should include a spot element to allow it to reflect the latest price trends rather than simply being pegged to itself.

> Suffolk-based 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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