Stability returns to pig market but prices need to rise
Stability returned to the UK pig market during October with the Deadweight Adjusted Pig Price (DAPP) opening at 144.80p/kg and ending on a slightly firmer note at the end of the month worth 145.07p
Spot prices also tended to harden during the month despite the euro coming under pressure from turmoil in the financial markets and the Eurozone crisis.
Cull sow prices have always provided a ready barometer of pigmeat values in Europe and these opened in early October in the 108p to 112p/kg region and by the end of the month rising cull sow quotes were between 112p and 116p/kg.
With cull sows now averaging more than £170 a head, producers have the opportunity to replace worn out breeding herds with young gilts and in some cases a cull sow will now pay for 1.5 replacement gilts.
Stability is also returning to the feed market with early November ex farm feed wheat deals in the £143 to £146/t range and LIFFE futures prices for January to May between £151 and £155/t.
Weaner prices are also starting to stage a modest recovery, especially for those being produced to Freedom Food standards where premiums of £2 to £4/head are available.
The 30kg ex farm average weaner price at the start of November was £41.28 a head compared with £39.98 a head in early October, according to AHDB. Despite the improvement this is still lower than cost of production break even levels for some producers.
This market remains affected by a general shortage of weaner accommodation due to ageing finishing units and alternative diversification projects such as barn conversions and light industrial use providing attractive alternative uses.
Some weaner producers on light land are also considering switching to outdoor rearing and finishing and although this will carry higher feed costs, it can in some cases still be a cheaper alternative than paying a third party contract finisher to rear pigs indoors, especially if as a result the stock qualify for outdoor finished Freedom Food premiums.
The latest data on European and world cereal stocks is also indicating lower feed prices in the months ahead. Global cereal production forecasts are showing higher yields and more tonnage available than were estimated in September.
The EU-27 cereal harvest forecast of 280m tonnes is slightly ahead of recent years and despite biofuel demand, international cereal prices were at an 11 month low in October.
Wheat export availability from the Ukraine has soared to an estimated 22m tonnes compared with around 13m tonnes last year and Russian exports are likely to be at similar levels.
Outlook
Finished pig prices are forecast to stay at relatively similar levels for the remainder of the year and providing the euro, which traded at a relatively low value of 86p at the end of October, does not fall further.
An overall year on year comparison paints a better picture for the industry as a whole. The early January 2011 DAPP was as low as 137.67p/kg and feed wheat was quoted in the region of £190/tonne.
However, with rising labour, fuel and straw costs, retailers and processors need to be reminded that for the UK pig industry to remain on a sustainable track, pigmeat prices still need to improve.
BPEX and the NPA are also expressing concern over the way in which other EU producer countries are likely to interpret the 1 January 2013 partial stalls ban.
Even after January 2013, their continued use will be allowed for a period of four weeks, which is equivalent to 25% of the gestation period.
As a result BPEX and the NPA are urging the major retailers and food service providers to make a public commitment to sell only UK welfare standard or UK compliant product to avoid a two tier market opening up continuing to undercut UK pigmeat produced to higher welfare standards.