Tricky decision needed on investment in gilts

6 November 1998

Tricky decision needed on investment in gilts

WITH MLC predicting the pig price to be at break-even of 90p/kg in March, producers should aim for maximum production, so consider whether to invest in gilts now.

Cull sows kept on for an extra litter, producing weaker pigs and smaller numbers may undermine production levels, warn consultants.

Signets Dan Morgan says that while the situation is not too optimistic, cull prices are rising and some deals on replacement gilts are worth considering. "Some may say it is already too late to consider buying gilts to get maximum benefit from an upturn in finished prices if the MLC prediction is correct.

"But it is whether producers are comfortable with the prospect of extending borrowings," he says.

Cull prices at Northampton topped 51p/kg recently – about £50 a cull sow – and typical replacement prices may be £95 a gilt, he says.

Independent consultant Peter Crichton is more cautious, recommending a move from fixed priced replacements to a market price related deal. "At current prices it is still two culls for one gilt. That is still a little high, but may be worth considering with old sows."

MLC predictions at last weeks South West Pig Fair at Shepton Mallet show sow numbers are still high in mainland Europe, running four to five months behind the UK. That suggests gilt prices may be under pressure for a while.

Mr Crichton adds: "Consider the worst case scenario. If finished prices are 70p/kg next March, could you still afford to have replacement gilts? I suggest it takes 36 weeks from a reduction in EU sows numbers before the UK price is affected, so advise caution."

But do not be tempted to reduce herd size, adds Mr Morgan. Maintaining output will ensure depleted incomes gain maximum benefit from any increase in finished prices. &#42

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