Peter Crichton’s commentary for January 29, 2016

Unfortunately, the pig industry glass is still more than half empty, although prices today have been generally at, or close to, stand-on levels, with some losing a penny or two and others (reluctantly) staying where they were during a week when EU pig prices have also generally remained at stand-on levels.

Contract pig values continue to retreat due to sharp falls in index and reference prices, which saw the SPP drop another 2.52p, and now stands at an all-time low since its introduction at 115.17p.

There was little demand for spot bacon, with most pigs going on contract, but weights are still very high with a near record 83.97kg deadweight being the SPP average, and contract space remains limited.

Spot deals were therefore reported to be very quiet, with one-off loads of spot bacon trading at around 100p, but some lower prices than this in places, especially for heavies, but once again “regulars” should have been achieving prices in the 102p-plus region.

The euro traded marginally firmer on Friday afternoon worth 75.96p compared with 75.32p some days earlier, but this had little or no effect on cull sow values, which have remained at stand-on levels, with reports of several large herds now heading for the exit door, but only worth in the 52p to 54p/kg region as culls.

Weaner prices have continued to drop, reflecting yet more uncertainty about finished pig values in the months ahead and a general lack of space in the system. The latest AHDB 30kg ex-farm average is now quoted at a mere £36.10/head, and on a pro-rata basis 7kg piglets look better value (to the seller), but still below COP levels at £28.87.

It’s a sobering thought that at this time last year 30kg weaners were averaging £56.38, £20 more than they are now; but by the same token, the SPP was worth 139p, which is £20 per bacon pig more than it is now worth. It looks as though weaner producers and finishers are equally sharing the pain.

Lower feed prices remain the only bright spot at present, with the latest ex-farm spot feed wheat average price quoted at £102.40/t, and futures prices ended another quiet week with March feed wheat quoted on the LIFFE market at £108.60/t and July at £114/t.

According to crop analysts, a 25% growth in US wheat stocks is expected to occur this season, adding another bearish trend to the market as a whole. This is coupled with the announcement that larger supplies of Russian wheat could soon hit export markets.

The surprise suspension of the European Private Storage scheme has also slammed another door shut at a time when EU producers need all the help they can get. Although PSA took nearly 90,000t of pigmeat and fat off this market, this is only equivalent to about 4.5% of monthly EU slaughter output.

And finally, some slight more positive news from the influential Rabobank which says global pig prices will “bottom out” in the coming months. Or perhaps that was a misprint, and it should have read that the “bottom will be out” of the pig market in the coming months?

However, according to Jon Millard, who knows about such things and trades in the Far East, Chinese pig prices are rising sharply and have hit £1.90/kg; so more sweet than sour for its producers.

Unless pigmeat prices can somehow rally, it looks as though only the fit or the fat will survive a further period of negative margins, which in some cases are resulting in losses as high as £15 for every pig going out of the gate.

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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