Recent improvements in EU pigmeat prices could be more than offset by higher feed costs.
Average prices among Europe’s six biggest pigmeat producing countries have risen by 14% over the past three months to reach €1.40 (94.5p/kg).
This has put up the cost of imports into the UK and as a result domestic pigmeat prices have also improved.
Deadweight pig prices have reached 109.2p/kg compared with 104.4p in March.
UK marketing groups are also forecasting a shortage of live pig availability at a time of year when barbeque demand normally improves.
Further rises are expected to reflect this trend providing the value of the euro is maintained.
Future rises in UK interest rates could strengthen the pound against the euro, which could encourage imports.
But the threat of rising feed ingredient prices has now proved to be a reality with feed wheat now worth up to £107/t off the combine.
Some grain trading groups are also offering “floor and ceiling”, three-year feed wheat contracts between £100 – £120/t. This underlines market sentiment that prices are unlikely to drop below the £100/t threshold during the next three years.
Feed wheat was traded a year ago at £75/t and the latest quotes represent a year-on-year increase of 30%.
Detailed calculations of the effect of rising cereal and oil prices will put an extra 15p/kg (£11.25/pig) on producers’ costs once the forecast price rises have filtered through.
Unless retailers and processors are prepared to lift their prices to match these extra feed costs, producers’ margins will remain on a knife edge in the months ahead.