Seasonal pig price pressure begins

Peter CrightonPIG BUSINESS – Topical commentary on the pig sector form independent consultant Peter Crichton

In line with seasonal trends, pig prices are starting to ease during the second half of 2011.

At the start of July the Deadweight Adjusted Pig Price was 153.43p/kg and the contract base prices quoted by Cranswick, Tulip, Vion and Woodheads averaged 152.37p/kg.

By the end of the month, the DAPP had eased to 152.34p/kg and contract prices fell by a greater margin to 148.12p/kg.

But on a more positive note for the pig industry, ex farm feed wheat values fell from £168/t to £153/t for new crop.

This compares with end of July 2010 ex farm wheat quotes of £121/t and any further downward movement in current prices will come as a relief to hard-pressed pig producers, many of whom are still operating at a loss.

Looking ahead, finished pig values are forecast to follow a downward seasonal trend until the end of the year.

The main causes appear to be indifferent retail demand at a time when consumers have become very budget conscious because of rising fuel and other household bills, as well as better UK slaughter pig availability due to increased productivity.

Many of the major retailers are promoting imported pigmeat. This now accounts for over 60% of the domestic market and UK producers are still finding it difficult to compete due to their generally higher welfare-related production costs when compared with Europe.

The cull sow market however also provides a ready barometer for EU mainland pigmeat prices linked to the value of the euro.

Despite the financial turmoil in many Eurozone countries, at the time of preparing this report the euro has remained remarkably strong in the face of a weak pound and is currently worth just over 87p, which is 5% higher than its value a year ago.

Cull sows are currently trading in the 100p to 104p/kg range and will at least provide those producers deciding to quit the industry or restock with a reasonable return as they cull their herds.

The image of the industry was not however helped by the recent release of undercover filming carried out by Animal Aid at Cheale Meats’ abattoir, which is the largest cull sow export plant in the country.

The images released showed alleged breaches of animal welfare and cruelty. This has led to calls for official on-site abattoir vets to be more effective in policing animal welfare, as this incident is a repeat of what occurred at A & G Barbers’ nearby cull sow abattoir only last year and led to their permanent closure.

Better vigilance should prevent any future breaches of welfare standards at a time when the UK pig industry is trying to promote its image as a high-welfare system when compared with many foreign competitors.

Falling weaner prices have also cast something of a shadow over the whole production system, with the latest AHDB 30kg ex farm weaner average of little more than £45.50 a head still well below most producers’ cost of production levels.

Industry traders are quoting a mixture of a lack of suitable finishing space, expensive feed and straw, as well as uncertainty over finished pig prices in the months ahead as the main reasons for the stagnant weaner market.

With banks generally reluctant to raise lending levels to pig producers, under investment in new finished pig accommodation may add to the lack of suitable space in the years ahead.

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