Peter Crichton’s commentary for June 24, 2016

Well, it looks as though “heart ruled head” as far as the EU referendum was concerned, with the surprise news that despite the bookies’ odds of 1/10 to “remain” on Thursday night, the “leave” brigade won the day at odds of 6/1.

Although there were immediate benefits to the UK pig industry in terms of higher pig prices due to the tumbling value of sterling against the euro on the currency exchanges, this could be a case of “short term gain, but long term pain”. We’ll see.

Pig prices were continuing their rally before the Brexit news broke with the SPP putting on a further 0.97p earlier in the week to 120.4p, but they still have a long way to go to catch up with the SPP 12 months ago, which stood at 132.38p, but at time, the euro was worth a lowly 71.07p compared with its rollercoaster value during the past 24 hours, where the euro traded at almost 82p on Thursday evening and closed at 81.46p on Friday afternoon.

Spot and contract finished pigs remain on short supply, with spot quotes in the 127p to 130p region according to spec, and well ahead of their contract counterparts where, in most cases, weekly contribution prices have been between 121p and 126p.

A soaring euro helped sow prices to improve by 4 to 5p/kg, with most quotes at or around 70p/kg, which is a welcome change from 52p at the start of the year. But as with finished pig prices, there’s still some way to go before we get into the black.

Weaner prices are still playing catch-up, with the AHDB 30kg average quoted at £40.45/head and the 7kg average improving to £30.09/head, with more buyers than sellers in this section, which is a welcome change from a few months ago when buyers could almost name their price. But on the basis that “nothing lasts forever”, some of those weaner producers who had to take this financial medicine have since decided to leave the industry to the detriment of the supply chain as a whole.

As pig supplies continue to tighten, the effects of the heavy sow cullings earlier on this year are being felt throughout the system, and weaner contract prices are expected to rise as finishers look to fill empty pens, some of which may have to stay that way!

On the basis, however, that every silver lining has a cloud, although pig prices may improve because of the currency situation, on the futures market November feed wheat has risen to £119.30/t, and other imported feed ingredients are likely to cost more.

It’s likely that volatility in the feed section will continue in the short to medium term and producers will need to keep an eye on the markets, and time spent in the office trading feed can often be more profitable than sitting on a tractor!

And finally, it will be interesting to see how the Brexit exit affects the UK pig industry as a whole, but in the words of a certain song, “there may be trouble ahead”.

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About The Author

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