Signs are starting to emerge of a better outlook for UK pig producers with reports of dwindling EU pigmeat numbers coupled with cheaper feed.
Although the GB Deadweight Adjusted Pig Price (DAPP) has been in decline since it peaked at 152.92p/kg in July and has since fallen to 144.92p/kg, better spot demand and fewer numbers coming forward might help to reverse this trend.
Forecasts of European pig slaughterings for next spring/early summer are showing falls of an estimated 1.3% in the second quarter of 2012 with further reductions in the third and fourth quarters of that year.
This is due to a drop in European sow herd numbers prior to the January 2013 introduction of the European sow partial stalls ban.
While European herds have benefited from rising productivity this may now have peaked and further falls in the size of the European pig breeding herd will translate into fewer slaughter pigs coming forward.
UK spot bacon prices have also started to rise with bids for pigs for the week commencing 10 October rising by 2-4p/kg in the spot market at a time when volume demand also normally improves.
As a result spot bacon quotes were in the 144-146p/kg range in mid-October and some traders believe this price may continue to improve into mid or late-November.
Lower feed costs
Feed prices have also been in decline for several months and the ex-farm feed wheat price, which was as a high £202/t in late April, has since fallen to £142/t by early October.
Futures prices are also pointing to lower forward feed values with the latest November LIFFE feed wheat quote of £150.15/t which is down by approximately £20/t on earlier positions.
European mainland finished pig prices have yet to react to potential supply reductions in the year ahead. The average producer price across the “big six” European producer countries is in the region of 130p/kg, but for a much heavier carcass with lower grading and other deductions compared with average UK bacon quotes of 12-15p/kg above this.
The reintroduction of the use of poultry co-products protein in pig rations would also help to lower overall feed costs, according to the European Farmers Union, Copa-Cogeca.
Although there is still some further work to done before poultry proteins can be included in pig feeds, the European Commission are reported to be moving towards lifting the European ban on processed animal protein once appropriate safeguards have been agreed and put in place.
Reports of slightly higher grain harvest results for European farmers despite unsettled weather will also help to ease the pressure on producers’ margins, but for many these still remain in negative territory.
The upcoming 2012 Olympics will also provide the UK industry with a worldwide shop window for their products and lead to improved demand for Red Tractor products.
Better overall prospects of finished pig prices with lower feed costs should also help to feed through to the UK weaner market which has remained under pressure throughout the summer and early autumn. The AHDB 30kg ex-farm weaner average has now hit a new low for the year of £39.98 a head, which still represents a loss of £4-6 a pig produced for all but the most efficient breeders.