Peter Crichton’s commentary for January 9, 2015

It’s been a disappointing start to the year, with retail demand reported to be “very quiet”, not to mention the ongoing slump in cull sow prices.

Contract prices tied to index prices are continuing to reflect lower values, with the SPP dropping by 1.49p to stand at 142.44p, and spot prices have also taken a turn for the worse despite earlier hopes that they might be on the road to recovery, with the few bids that were available tending to be in the 128p region. Spot sellers supplying regular outlets on a weekly basis would generally be looking at prices of 4p to 6p more than these levels.

Cull sow prices have always proved to be an accurate barometer of European pigmeat values and are continuing to paint a particularly dismal picture with a further 3p lopped off next week’s quotes, with the result that most cull sow bids are now in the 60p to 63p region according to load size and spec, meaning that the average 140kg deadweight sow is, after deductions, worth little more than £80/head.

At current values it will take two sows to buy one gilt and not the other way around; that is, BOGOF in reverse! The situation has not been helped by a further weakening in the value of the euro, which traded on Friday worth 78.12p.

Although fewer spot weaners were being offered, with most now sold on contract, this sector also remains under significant pressure due to the indifferent outlook for finished pig values in the weeks ahead, coupled with no signs of potential reductions in feed costs.

The latest AHDB 30kg weaner price has slumped from £48.33/head a week ago to £44.38 today, although 7kg values have held relatively firm and are quoted at £34.66 compared with £34.35 seven days earlier.

Once again, however, there is a wide gap between spot and contract values and nine times out of 10, it pays for sellers in all categories of pigs, both finished and store, to have supply contracts in place rather than risk the vagaries of the spot market where, often, the hottest can soon become the coldest.

Although feed wheat prices on the LIFFE futures market have closed a shade easier, with January quoted at £130.25/t and November at £141/t, spot wheat remains firm at £128.60/t on an ex-farm basis. UK protein prices are also showing slightly firmer trends with rapemeal up £3 to £191 ex-mill. Concerns about reports of dry weather in Argentina have led to some technical price rallies as far as soya bean values are concerned, with additional exports to India also adding to this. UK hipro soya is now quoted at circa £360/t.

And finally, when America sneezes, we shiver, and producers should treat recent reports seriously that US pig production levels are rising as finishers are also taking pigs to significantly heavier weights and these extra numbers have already hit US pigmeat prices, putting downward pressure on futures.

Forecasts of an 8% year-on-year increase in pig production levels will also put the whole European market under further pressure at a time when we can least afford it. Although there are no easy answers to this problem, producers should be aware that tough times may lie ahead on the whole international pigmeat market.

> 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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