Peter Crichton’s commentary for August 23, 2013

As anticipated, it looks as though the shout price system originally introduced by Tulip in 2009 may soon be phased out.

Woodheads has already announced it will no longer be issuing weekly prices, but will be using price formula that it feels is more transparent and fairer to both sides. The company will be discussing future pricing arrangements with individual producers.

This move was followed by Cranswick, which will also no longer be announcing a weekly shout price. But, subject to any further decisions that have yet to be made, the latest remaining weekly shouty prices are as below:

Gills, 169p/kg (+3p)
Tulip, 163p/kg (stand on)
Karro, 159p/kg (stand on)

Unweighted Average Shout Price, 163.67p/kg

Although Tulip left its weekly price at similar levels, Gills went up by 3p to move these prices closer to the spot market where bacon pigs were mainly traded in the 172-175p/kg range, depending on spec.

Although producers sending to Woodheads and Cranswick on a weekly price system will be free to renegotiate, it’s hoped they will not all opt for a DAPP+ system, because if this is the case the DAPP, which currently stands at 167.86p, will be very slow to react to any movements up or down and may well be out of step with the latest trading levels.

An alternative would be to include matrix prices that might include the DAPP, a weekly price element, a spot price average and perhaps a COP link.

At the same time, it’s important that in order to provide an accurate DAPP index price, BPEX ensures that the prices it receives from processors include various so called “stealth” payments and other below-the-line “premiums” to provide an accurate industry average figure.

Although many matrix prices may include a weekly price, this could only be between a nill and a third of the overall make-up, rather than forming 100% under the existing shout price system.

Pig supplies remain on the tight side with most of the major players, with the exception of Karro, slaughtering on Bank Holiday Monday, and if anything, more pigs could have been sold to advantage this week.

Cull sow prices continue to soar with this week’s quotes up by a further 2-3p/kg, helped to some extent by a firmer euro that traded on Friday worth 85.96p. But better European mainland demand, coupled with a reduction in cull sow availability, has also helped to lift cull sow quotes up to, and in some areas beyond, the 130p/kg benchmark.

Weaner prices are also continuing to improve, albeit at a fairly modest rate, with the latest AHDB 30kg ex-farm weaner average quoted at £53.66/head, with £2-3/head premiums for Freedom Food types. And 7kg pigs are also in demand trading in the £36-40/head range.

Cereal prices have staged a modest recovery from last week’s levels with November wheat quoted on the LIFFE market at £156.57/t and March 2014 at £160/t with ex-farm feed wheat trading at around £143-145/t looking good value.

Some concerns over dry weather conditions in the US are helping to bring a few of the bulls back into this market, although the picture remains variable with good yield potential seem in some states, whereas the English crop survey is highlighting a decline in wheat and oilseed rape areas with prices tending to strengthen.

My advice on following the feed market can be a little like some of my racing tips, but there might be some sense in producers looking to lock in for a proportion of their feed price needs at this stage.

> 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

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