By Peter Crichton
PIG producers should secure a reliable outlet willing to buy pigs on a weekly basis, say consultants, who fear that a future drop in prices is probable rather than merely possible.
Spot market prices this week remained virtually steady, with bacon pigs worth 82-86p/kg. But the UK AESA price continues to slide steadily and was worth just 91.15p for the week ending 20 June. Many analysts expect the AESA will now dip below 90p/kg before the end of the month.
Existing contracts with the UKs biggest slaughterer, Malton Bacon, will expire in two months time. A large number of unwanted pigs could then be dumped on the spot market as the company changes its buying policy.
As a result, non-contracted pigs could be very hard to place – especially as the supply of slaughter pigs is already at near record levels
All of these factors will probably tempt most former AAPP-based suppliers to reluctantly agree on a fixed price with buyers for the rest of the year.
But there is no guarantee that the bigger buyers will keep the goalposts where they are. Indeed, some buyers may drop prices again if a gap opens up between their “agreed” price and the current AAPP or spot quotes.
The so-called “Malton move” has eroded much of the trust that had existed between suppliers and buyers in the pig industry. And many fear that formerly loyal producers will no longer have any hesitation in dumping fixed-price abattoirs, too, if the chance arises to obtain better returns elsewhere.
Some pig analysts have suggested that the only way forward is for both sides to agree to a legally binding supply contract that cannot be broken, except in exceptional force majeure situations.
But initial reactions to this suggestion have met with little enthusiasm from abattoirs and it once again seems that all the risk will be borne by producers.