Finished pig margins under pressure in 2010

In the seventh of our sector-by-sector outlooks, FW and consultant Andersons explore what 2010 might hold for finished pig businesses

Finished pig prices are under pressure as processors seek to reduce the gap between the premium prices for higher-welfare, heavily regulated British product and imported cheap pigmeat.

Prospects for 2010 will depend in no small part on currency exchange rates and the first real upturn in the size of the UK breeding pig herd for more than a decade.

DEFRA’s June census indicates a 4.6% rise in sow numbers to 440,000, compared to 421,000 a year ago.

Slaughterings have picked up in the second half of the year, mainly due to better sow productivity and lower disease incidence. “Sow productivity has been increasing for much of this year, and is estimated to be 7% higher than a year ago,” says Andersons’ Lewis Butlin.

While returns from finished pigs fell back in the second half of 2009, they remain almost 10p/kg higher than last year. The Deadweight Average Pig Price rose steadily to peak at over 150p/kg in April, but then fell away to just under 140p/kg in December. Sow prices at around 112p/kg are more sustainable than the higher values seen in 2008.

“Risk management strategies make sense for pig producers, although some are finding processors have been moving away from contracts to spot prices and away from DAPP-plus premiums previously paid,” says Mr Butlin.