A new BPEX analysis, exploring the relationship between prices for weaners, finished pigs and feed, suggests that while weaner prices are normally set in a “rational way” there have been times in the last nine years when “industry sentiment” has also played a part.
Covering the years from 2006 to 2014, the analysis sets out to provide producers with an improved information background, against which to assess the “likely direction of weaner prices” going forward.
Noting that, in recent months, weaner prices have followed the same downward trend as finished pig prices, despite feed prices being at a relatively low level, BPEX said it was “unsurprising that these two factors are the main determinant of weaner prices”. The heart of the analysis, however, looks at how the two factors come together in influencing the weaner market.
“During the nine-year period, weaner prices ranged from just over £30 per head to over £57,” said BPEX. “This is a slightly greater percentage variation than that seen in finished pig prices, which have ranged from just over £75 per head to nearly £140. Weaner prices have often shown more short-term volatility too.
“Comparing the two pig price series shows that, as expected, there is a broad relationship between them. On average, the 30kg weaner price was around 40% of the finished pig price during the nine years covered. However, there were periods when it was higher than this and periods when it was lower. The percentage reached as high as 48% in 2009 and again in early 2010 and fell as low as 32% in late 2012.”
While seasonality issues cover some of the variation in the relationship between weaner and finished pig prices, there’s also a suggestion that “industry sentiment” has a part to play.
BPEX observed, for example, that weaner prices were sometimes lower than predicted by the analyst’s “weaner model”, including during the second half of 2011 and the autumn of 2012, both periods when producers were “losing money and were concerned for their future”.
“Equally, prices were higher than expected in the summer of 2009 and for much of 2010, periods when profitability had been good, for the first time in many years, and producers were in a positive mood,” said BPEX.