Peter Crichton’s commentary for January 30, 2015

As anticipated, Friday was an even tougher day for sellers and, in particular for their bank balances, with the SPP continuing its downward trend. It now stands at below the 140p benchmark, losing another 0.92p to end at 139.9p.

However, the gap between spot and contract prices continues to widen as the latter attempts to compete with even cheaper foreign pigmeat imports. There were reports of spot bacon traded as low as 115p/kg for one-off loads, but regular sellers were generally able to achieve 5p to 10p more than this.

Although some people will not like to hear this, probably the only way in which the backlog in UK pig numbers can be averted is for prices to fall further so they become more competitive with foreign imports, but unfortunately during these lean times, BOGOF stickers on pigmeat may have more influence on consumers than welfare friendly point of sale signage.

The situation has not been helped by further falls in the value of the euro, hit by financial uncertainties over the Greek situation as eurozone deflation gathers pace, although its value improved marginally on Friday, trading at 75.2p. This makes a dismal comparison with its value a year ago of 82.96p.

Fortunately, however, cull sow prices have actually held at last week’s levels, with reports of very slightly firmer pigmeat prices in parts of Europe, although any further news of the proposed relaxation of pigmeat exports to Putinland have yet to take effect and Brussels is still resisting calls for private storage aid for pigmeat.

As a result, cull sow prices have remained disastrously low at stand-on levels, with most quotes in the 56p to 59p range according to load size.

Weaner prices have shown a slight improvement, due to reduced numbers, and their recent roller-coaster ride is now on the up section. But it’s only to a marginal degree, with the latest ADHB 30kg ex-farm average quoted at £47.10/head and 7kg at £34.15/head.

Any signs of an increase in finished pig prices would work wonders as far as weaner demand is concerned, especially at a time when feed prices are tending to move in the pig producer’s favour. Following bearish trends throughout worldwide cereal markets, UK feed wheat traded today on the LIFFE exchange at £123.25/t for March, and longer months such as November at £130.75/t. Spot wheat values have also slipped again by a further £4 to £118/t ex-farm.

And finally, the gloomy mood throughout the pig industry is reflected in recently published forecasts that average farm business income is likely to fall by about 20% for the March 2014 to February 2015 period. At the stage this report was published, finished pig prices were also indicating an average drop of 7%, although on the positive side, input costs will also reflect falling cereal and protein values. But in net terms, with COP levels estimated at around 140p, most breeder/finishers are now losing money. Those who aren’t will be fairly soon if the current trend continues.

The only crumb of comfort may be that producers may lose less in February as it’s a shorter month!

> 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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