Premium pigs hit harder in current price decline?

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In the four weeks ended 20 January, the APP declined by 2.76p, over 0.5p more than the SPP over the same period.

This reflects a trend seen since August, when GB pig prices first started declining. Since week ended 26 August, the price for the APP sample, which includes “premium” as well as standard pigs, has declined 17.2p, falling to 151.00p/kg in the latest week. In comparison the SPP, which covers only standard pigs, has fallen by 16.41p.

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The data suggests the proportion of pigs slaughtered as “premium” has remained largely stable since October 2014. As such, it seems the size of the additional payments made for premium pigs, rather than the makeup of the sample, has primarily influenced the narrowing gap between the APP and SPP.

The data suggests premium pigs have been hit harder by the recent price declines than standard pigs. This is unusual, as previous analysis indicates that the SPP usually falls faster in a downwards market, and rises quicker when the market is moving up. This is thought to be due to the influence of more volatile spot prices on standard pig prices, whereas premium pigs are virtually always sold on contract. As such, standard pig prices are typically inflated relative to premium prices when values are rising and reduced when the market is falling. This has not been the case in recent months.

Why the APP is falling at faster rate than SPP remains somewhat uncertain. It could simply reflect some adjustment in the market. Between December 2016 and the end of March 2017 the APP price series increased 0.61p ahead of the SPP, widening the gap between the two series even though the market was still rising at the time. Equally, market forces may be at play. Premium tier pork attracts higher retail prices, but with food prices in general currently rising, it may be that demand for these more expensive products has weakened relative to cheaper pork.

Average carcase weights for the SPP and APP samples have also shown some unusual trends in recent months. Both series recorded substantial year-on-year increases in weights last autumn, partially influenced by plant breakdowns. However, the APP sample was disproportionately affected. Average APP carcase weights are usually below those for standard pigs alone, however they were virtually on par with each other between mid-October and mid-November last year, at around 85kg. The APP probe measurement also reached a record 11.8 at this time, suggesting lower carcase quality amongst the “premium” pigs could have also had some bearing on the larger decline in the APP.

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AHDB will continue to monitor how the gap between the APP and SPP develops in the coming weeks. It will be interesting to see whether the trend returns to the usual pattern or continues to diverge. With the end products of premium and standard pigs being marketed differently, it is important to understand any differences that develop in their prices.

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Bethan Wilkins, Analyst

bethan.wilkins@ahdb.org.uk, 024 7647 8757