Another big increase in SPP as supplies tighten and demand remains strong
8th Apr 2021 / By Alistair Driver
The SPP continues its encouraging upward trend, gaining another 1.18p in the week ending April 3 to average 141.74p/kg.
This movement follows reports of strong underlying demand and tightening supply levels, according to AHDB. The price index remains more than 20p below 2020 levels, but is now less than a penny below the five-year average.
Processors have continued to work their way through the pig backlog during the Easter period. "Even what would often be a short working week due to the Easter holidays failed to dampen the upward movement, with market commentary indicating many processors worked through the break. Whether the trend holds for the second ‘Easter week’ (week ended April 10) remains to be seen," AHDB analyst Bethan Wilkins said.
Estimated slaughter was down 6% to 197,000 head, although this was still 11% above the same week last year and well above the five-year average, even though this week in 2020 did not contain a bank holiday.
However, it is possible the weekly slaughter estimates will be adjusted down when actual Defra figures for March are released, Ms Wilkins cautioned.
After hitting record levels in excess of 90kg in recent months, the average carcase weight continues to fall, decreasing by 240g to 88.28kg last week. Weights are still in excess of 3kg heavier than last year, as has been the case throughout 2021 so far.
The EU-spec APP also rose in the week ending March 27 2021, gaining 1.56p to stand at 145.49p/kg. This widened the gap between the APP and SPP to 4.93p, the largest difference this year.
The widening gap indicates that either more premium pigs came forward that week, or the premiums being paid for these pigs have increased, Ms Wilkins added.
Meanwhile, pig prices across the EU have risen sharply over the past few weeks, following a period of relative stability.
The average EU pig price for the week ended March 21, was €155.19/100kg, €24 higher than four weeks before. The recorded price is the highest since last July and represents a return to more normal levels, following a period of low prices earlier in the year.
In sterling terms, the rise in EU prices has been moderated slightly by the strengthening of the pound against the euro. The latest price is equivalent to 133.07p/kg, 19p up on four weeks earlier.
The gap between the EU and UK price has declined significantly, to just 8p/kg in the week ending March 21, having been nearly 26p just four weeks earlier.
"The latest difference is the smallest since April 2020 and could perhaps support prices here in Britain by reducing the potential for pressure from imported pork," Ms Wilikins said.
Nonetheless, recent reports indicate that demand on the continent has stagnated. Much of the recent increase appears to have been driven by a tighter live pig supply, as previous backlogs were cleared. This makes further price growth less likely, according to Ms Wilkins.
The rise in EU pig prices has largely been driven by increases seen in German and Dutch prices, with both countries face declining pig herds.
The German market is always a major signpost for trends to come in the overall EU price. The German Reference Price has risen from 109p/kg in late-February to 134p/kg in the week ended March 21.
But for the past few weeks, the VEZG recommended price for German pigs has been stable, suggesting recorded growth in average prices may ultimately stall in the coming weeks, Ms Wilkins said.
Spanish quotes have also risen strongly, driven by export trade with China. Although French and Danish prices have also increased, these rises were more modest than those in other member states.