Peter Crichton’s commentary for September 19, 2014

Sharp falls in European mainland pigmeat prices are hitting the UK market, where the DAPP lost another 0.72p and now stands at 156.34p. Contract numbers remain well ahead of demand, and as a result significant numbers of pigs have either been rolled or offered on the spot market, where prices in the 145p region have been, in some cases, the best sellers were able to achieve. More regular spot sellers were able to able to trade in the 150p-plus territory.

European and UK pig producers are facing the twin challenge of higher production levels and falling demand, and better prolificacy among sows is putting more pigs into the system at a time when consumer demand appears to be on the slide.

The recent Russian embargo on meat imports from the EU is also putting significant downward pressure on the pig market, with large stocks building up, and very few alternative markets are currently prepared to absorb these stocks, although if Private Storage Aid is introduced, this would provide hard-pressed processors with a source of revenue to meet spiralling storage costs.

Yet another challenge is the strength of sterling, which soared following the news from north of the border that our tartan-clad neighbours have decided life was better with us rather than on their own, and this saw the value of the euro weaken to 78.57p on Friday, which further reduces the cost of pigmeat imports and reduces the value of anything we can sell abroad, such as cull sows.

As a result of the Russian blockade, falling demand and the strong pound, cull sow values crashed by 7-8p/kg this week, with most quotes within the 85-88p range.

Weaner prices are also continuing to suffer from a continuing lack of finishing space in the system, with the AHDB 30kg weaner average dropping to £52/head and 7kg £38.83/head, but these prices mostly relate to contract deals and spot prices have been anywhere between £2-4/head below this and are continuing to fall.

Although feed prices are moving in producers’ favour, with the latest Farmers Weekly ex-farm feed wheat price as low as £102.80/t, concerns over further falls in finished pig prices in the months ahead are putting something of a lid on weaner demand.

Cereals futures prices continue to signal bearish trends, with November feed wheat quoted at £111.50/t and next May slightly firmer at £117.75/t.

USDA supply and demand estimates are continuing to contribute to a bearish message, and despite reports of early frosts in the US northern plains, 74% of the US maize crop is in good condition, which should also help to maintain downward pressure on forward prices.

Proteins are also reflecting easier trends with hi-pro, ex-East coast September soya meal prices of £329/t, £6 lower on the week, and rapemeal prices ex-mill for September delivery at £167/t, which is £4 lower than a week earlier.

And finally, the outcome of the Scottish referendum has solved one potential problem, which would have been what to call the Scottish pig index price if independence had been achieved as we could have ended up with two SPPs to add to our confusion!

> 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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