Tulip’s decision to drop its shout price by a further penny was met with dismay by many sellers at a time when European pigmeat prices are continuing to soar; the euro has closed higher and spot buyers were looking for pigs and prepared to pay up to 174p/kg.
Although Cranswick, whose shout price is already significantly below market levels, elected to stand on at 160p, the other big three contract buyers all followed Tulip’s lead and dropped a penny, so the batting order now reads as follows:
The unweighted average shout price is 162.8p
In mid-May shout prices averaged 163.4p and the European average producer price was 132.63p. Since then, the shout price average has dropped to 162.8p, but the European price has shot up by over 20p/kg and now stands at 153.28p.
Although wholesale demand for legs and loins has remained under pressure, with ongoing barbeque weather forecast, demand for most other parts of the pig remains firm.
One main problem with the shout price system is that additional top-up “below the line” and so called stealth payments are often made, but not included within the DAPP calculation. Rather like cheap air flights if it costs £20 to fly to Dublin plus charges of £10, the cost is £30, not £20!
The underlying problem is that shout prices are widely publicised and hardnosed retail buyers will use this as a way in which to either resist further price rises or grind the price down at the producers’ ultimate expense.
Everyone else in the supply chain normally retains their margin and it’s the producer who ultimately suffers.
A combination of a firmer euro and better European mainland demand for manufacturing grade pigmeat has also helped to keep cull sow prices rising and these went up by a further 2-3p/kg today, with most sellers able to obtain prices in the 123-126p/kg range, according to spec, and the euro traded on Friday worth at 86.87p compared with 86.30p the previous week.
With the wheat harvest around the corner, cereal prices are continuing to fall with the latest ex-farm feed wheat price quoted at £153.70/t, down from £158.90/t the previous week.
LIFFE futures prices have had a relatively quiet week with November quoted at £163.45/t and next March at £164.75/t.
Weaner prices have, however, remained relatively static over the past week with the AHDB 30kg ex-farm weaner average quoted at £53.54/head and 7kg weaners trading in the £34-38/head range.
And finally, it’s all very well criticising the pricing system, but we need to come up with a better alternative to shout prices. Some have been suggesting a 50/50 price based upon the DAPP and factory/shout price and that all below-the-line payments should also form part of the DAPP compilation to provide retailers, producers and processors with an accurate industry price.
It’s hard to believe that any abattoirs are actually sourcing significant numbers of pigs at 160p/kg apart from the blind, deaf or dumb, so why publish them in the first place?
> Suffolk-based Peter Crichton is an auctioneer 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