APP/SPP pig price reporting gap has doubled since April 2014

A year on from the replacement of Deadweight Average Pig Price (DAPP) as the industry’s key price reporting system, BPEX has noted that the gap between the current APP and SPP pig price series is now close to 4p/kg, double what it was in April 2014. The big question is why is the gap increasing.

There is a simple explanation, of course, in the fact that Average Pig Price (APP) includes premium pigs and Standard Pig Price (SPP) doesn’t, but BPEX is analysing the growing gap between the two to see what other factors may be at work.

“There are two main reasons why the gap may have increased, although they are not mutually exclusive,” said BPEX. “First, the proportion of premium pigs could have risen. If this was the case, they would have a bigger influence on the APP, which would increase while the SPP would be unchanged.

“Secondly, the difference between the average price of ‘standard’ pigs and the average price of premium pigs could have grown.”

To test if the proportion of premium pigs has risen over time, BPEX looked at the proportion of total GB pig slaughterings included in the SPP sample. This showed that in the first three months of SPP, it covered 51% of the GB kill. In early 2015, the share had fallen slightly to 50%, suggesting there may have been a modest increase in the share of pigs attracting a premium. However, the shift would be too small to account for much of the observed increase in the gap between APP and SPP.

“It therefore seems that the main reason for the increased price gap is that premium pigs are now attracting a higher price relative to standard pigs,” said BPEX. “In part, this is probably an indication that the premiums being paid have increased.

“However, industry reports also suggest that the range of prices paid for standard pigs has been increasing. This is partly because spot market prices, which are more exposed to the wider EU market, have reportedly experienced bigger falls than contract prices. In addition, with many contracts having previously been linked to the DAPP, there is now reported to be a wider range of pricing mechanisms in use.”

Given the questions which remain concerning what is actually happening, however, BPEX added: “The increase in the gap between the APP and SPP clearly results from some important changes in the GB pig market. It will be interesting to monitor how it develops from now on and what it tells us about the market.”

See full BPEX analysis

Get Our E-Newsletter - Pig World's best stories in your in-box twice a week
Will be used in accordance with our Privacy Policy

About The Author