Friday, 2 June, 2000
By Peter Crichton
To the relief of every pig farmer in the UK deadweight quotes have at last broken through the 100p/kg ceiling.
Spot quotes today, Friday, will see most buyers lift their bids to hit three figures for the first time in over two years.
This is due to a combination of factors which include higher EU prices, falling numbers of live pigs in the UK and the recent slip in the value of the Pound.
In Europe a significant price rally has taken place which has lifted heavy 77-89kg carcass prices in Germany, Holland, Denmark and France into the 80-90p/kg range.
Although Spain is lagging behind closer to 70p/kg, prices there are forecast to catch up with the rest of Europe according to demand.
The AEX Dutch futures market is sending out market signals right through to the end of the year in the 84-87p/kg bracket, although commentators report that this sector remains fragile and may lack stability in the months ahead.
On the currency markets the recent rise in the value of the Euro has helped to add cost to imports and helped export values.
The Euro now stands at around 62.5p compared with 57p a few weeks ago. Although a great deal of ground still needs to be made up to get back to the launch price of over 70p, traders report that this is at least a step in the right direction.
UK slaughter numbers continue to slip and last week fell to a mere 225,000 compared with a massive 301,000 two years ago at the start of the price slump.
This fall in throughputs will add to the overcapacity in the abattoir sector and further rationalisation and closures are forecast.
The effects of PDNS and PMWS are also continuing to take more pigs out of the system and there are further reports of similar problems in some of the major EU pig production countries too.
Although the UK AESA only managed to put on a modest 0.23p/kg this week to stand at 93.59p/kg for the week ended 27 May, the price hike on the spot market will filter through into next weeks calculation and further gains in the index price are forecast.
Feed prices are still at low levels in spite of the correction in the value of the Pound with “off the combine” cereal quotes of between 56/t to 60/t on the table at present.
The delivered price of soya has moved up to between 156/t and 170/t according to region.
Producers should still be able to forward buy good quality rations for no more than 110/t and sow feed for just under 100/t.
Bank borrowing and finance charges are however still a thorn in the side of most breeders after over 2 years of negative returns. They can add up to 5p/kg to conventional production costs.
Signet estimate that the average breeder/finisher needs to achieve close to 90p/kg deadweight to break even. With the addition of borrowing costs and abattoir deductions at 100p/kg, deadweight bid price still leaves precious little retained income for the producer.