Finished pig prices could make further gains as supplies tighten

By indpendant consultant Peter Crichton

There is scope for further rises in finished pig prices as a combination of tighter EU supplies and a smaller UK breeding herd help push values higher.

New figures from the Agricultural &Horticultural Development Board show the effects of higher sow cullings in late 2007 and early this year are now starting to bite throughout the pigmeat supply chain.

Since the start of June, the AHDB estimates that GB pig slaughtering levels are down by more than 10%.

This followed overwhelming financial pressures suffered by producers following the surge in feed prices after harvest last year and the August 2007 FMD outbreak.

As a result sow cullings for the first five months of 2008 were up by almost 30% compared with the same period last year.

Although progeny pigs from some of the sows culled during this period are still in the system, further sharp falls in finished pig availability are likely this autumn.

Even though the rate of sow culling is now starting to ease, the May 2008 sow slaughter numbers are still 11% higher than the previous year.

Due to supply shortages finished pig prices have also moved sharply higher.

Between the start of the year and mid June the GB Euro Deadweight Average Pig Price has risen from 110p/kg to 131p/kg and as pig supplies continue to tighten, further rises could be seen.

The June 2008 Pig Census should provide additional confirmation of the reduction in the overall size of the UK pig breeding herd and finished pig availability.

But the feed price outlook is painting something of a mixed picture for UK pig producers.

According to the Home Grown Cereals Association, although overall feed wheat usage is forecast to drop due to lower demand for animal feed with other alternatives such as maize also becoming popular, this is not expected to lead to a significant fall in harvest 2008 prices.

August feed wheat quotes have moved up by about £10/t over the past month to £140/t or more in most regions.

The high cost of soya and the ongoing trade disruption in Argentina is also putting pressure on forward prices with soya now trading close to £300/t.

As a result producers will find it hard to buy ready-made compound pig rations for much less than £200/t, compared with £140/t a year ago.

Providing there are no sharp feed price rises this autumn and the EU wide shortage of slaughter pigs continues, a return to profitability for UK pig producers is on the cards for later this year.