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Demand Firmer than Forecast

13 November 2012

UK - With some big numbers being slaughtered next week demand has been firmer than forecast despite a lack lustre euro which traded on Friday at 79.8p, writes Peter Crichton.

The DAPP has also strengthened and now stands at 159.46p. Sellers are hoping the DAPP might breach the 160p benchmark in the weeks ahead, but a quick glance at the report below on soaring grain prices shows just how far the pig price needs to move to fill the yawning gap between costs and returns.

With such large numbers going on contract, spot buyers had to think in terms of offering prices in the 161p–163p range to meet their orders, but reports are also being received of cheaper European Union imports undercutting the domestic market.

Despite better spot demand all five shout prices have remained as last week.

163p Woodhead
160p Gill
159p Tulip and Vion
158p Cranswick

Despite a relatively weak euro and large numbers being slaughtered, cull sow demand has remained at similar levels with prices generally between 115p–118p according to spec, but following rising cull sow slaughtering statistics a black hole will appear in the British pigmeat supply chain next spring/summer.

Weaner prices continue to improve despite rising feed costs with the latest Agriculture and Horticulture Development Board ex-farm weaner average quoted at £44.22/head, but spot weaner trades are now being reported at £2-£4/head above this.

Grain prices however remain the major challenge facing the industry and we are now in uncharted waters with ex-farm feed wheat quoted at £205.10/tonne and LIFFE futures prices at record levels with this month at £221/tonne and March 2013 at an eyewatering £226.50.

One ray of hope was the announcement this week that following many months of discussions between NPA and Tesco, agreement has been reached in principle for the retail giant to procure an estimated 15,000 slaughter pigs per week direct from a core of 140 producers on a CoP basis, which will include a feed price escalator.

It remains to be seen how this will be put into effect with reports of a farmer committee being created, but slaughter arrangements have yet to be announced.

With most baconweight pigs already being sold on contract direct to processors rather than to retailers, with the main exception of the Woodhead/Morrisons and Waitrose arrangements, potential suppliers may have to serve notice on their existing outlets.

Whatever the outcome, the Tesco deal is to be encouraged and might lead to a wider acceptance in the retail sector that as with the oil/petrol industry, increases in costs have to be absorbed by the end user rather than by the producer.

Trafficlights Peter Crichton

TheMeatSite News Desk

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