Peter Crichton’s commentary for June 20, 2014

Rather like the performance of the England World Cup team, demand was slightly underwhelming today, reflected by easier spot quotes with most contract prices with a DAPP element also heading south, with the latest DAPP down by 0.33p to 164.2p.

Although there’s no significant backlog of pigs in the system, with live supplies relatively tight, demand still remains generally lacklustre with the loins and legs particularly hard to sell.

June is normally one of the best selling months of the year, and this time in 2013 spot bacon was trading at about 174p/kg.

Spot bacon quotes today were generally in the 165-167p/kg bracket, but this could still move ahead if demand improves due to better weather stimulating barbecue trade.

Cull sow prices, however, took their first upward step for many weeks, with the two main export buyers adding 2p to their bid prices with the result that most cull sows were traded in the 92-94p/kg range despite a relatively weak euro which traded on Friday worth 79.8p.

Falling feed prices should help to increase demand for weaners and this was, to some extent, confirmed by recent increases in the latest AHDB weaner averages with 30kg pigs now quoted at £56.82/head and 7kg at £41.99/head.

As mentioned, feed prices are continuing to fall with ex-farm feed old-crop wheat quoted at the start of the week at about £142.80/t and new crop off-the-combine prices a little more than £130/t.

All this is music to pig farmers’ ears (apart from those who may have fixed at a much higher price or who also have large arable acreages, but at least they can console themselves with the fact that a small 100-acre arable farm is now probably worth in the region of £1 million!).

Futures quotes are also painting a brighter picture for pig farmers with July futures quoted at £139.75/t and November £1/t below this due to exceptional crop conditions in the Northern Hemisphere.

And finally, weaner and finished pig sellers need to give consideration to the effect that the termination of the DAPP in October might have on their contract prices. Although the SPP (Standard Pig Price) is due to be published soon, this only reflects basic prices without premiums and the latest APP which is based on prices submitted by sellers (rather than the buyers) is 166.02p compared with the DAPP (provided by the buyers) of 164.53p.

If we end up with SPP-linked contract weaner or finisher prices, greater premiums will need to be added to those contracts linked to the SPP for producers to get a similar return to present levels. As we all tend to leave everything to the last minute, now rather than October is the time to start talking to buyers to see what new terms can be negotiated, preferably excluding factory-based prices as this could, to some extent, be a return to shout prices that proved to be widely unpopular with many sellers.

Forward fixed price contracts may be the route to take for breeders/finishers and there are already some processors putting offers on the table.

> 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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