Pig business: cautiously optimistic

The widening gap between domestic and European pig prices has shown signs of slowing over the past week, but there is cautious optimism the recent return to profitability can be sustained.

This week’s GB average price was around 138p/kg deadweight, some 26p/kg above the same time last year equivalent to £19.50 for a typical 75kg dwt pig. The DAPP has increased steadily since the New Year and sits well ahead of the EU-27 average of just below 120p/kg (see table).

“Pigs have eased a bit over the last 10 days or so, but we’re still looking at 15-20p/kg more than last year and trade remains good,” Richard Haigh, auctioneer at Selby livestock mart said. “The meat trade in general has eased, as everybody is wary of the credit crunch, but, hopefully, pork demand and prices are holding up.”

Generally tight supplies at home and across Europe are supporting prices, but the biggest factor for UK producers has been the weak value of sterling against the euro, making exports more competitive and reducing the threat from cheaper EU imports.

“If we were in the euro, domestic prices could have been 15% lower,” independent consultant Peter Crichton said. “If the pound recovers, it will put real pressure on the sector.”

But for now at least, prices are up and demand is strong, partly boosted by the recent Jamie Oliver television programme promoting British pork, he said. What’s more, feed wheat prices of £100/t are about half this time last year, which has reduced cost of production noticeably for most units, he added.

“It’s generally accepted that the cost of production for a bacon pig is around 130p/kg. That probably leaves a margin of £5-6 a pig above costs, whereas this time last year prices were generally below the cost of production.”

Mr Haigh said cull sow values were also strong, averaging 73p/kg last week, compared with 45p/kg last year. “The sow market in particular is very export driven,” he said. “Despite the high cull sow values, I don’t think there’ll be anyone inclined to go out of pigs at the moment though. The finished price is quite good and feed prices are lower, which is all in favour of the sector.”