Tuesday, 2 February 2021
Although not encouraged, in the absence of another widely used price setting mechanism, it is easy to understand why the Standard Pig Price (SPP) is commonly referenced in pig contracts. A quick estimate puts the value of contracts that have some reference to the SPP at perhaps £0.5bn each year. However, the SPP is intended simply to reflect the price of pigs, not determine their price.
This video explains how the SPP is calculated, what causes it to move, what doesn’t, and why it evolves slowly compared to some European price markers. Over its lifetime, weekly movements upwards in the SPP (+0.62p) have on average been the same as weekly movements downwards (-0.61p).
Recently, with COVID-19 related difficulties constraining processing plants, carcase weights have increased. This means the role of heavy pigs in the SPP (which we’ll define as those weighing 105kg or more) has again been receiving more attention. In the 12 months up to the beginning of October 2020, heavy pigs made up on average 1.2% of the SPP sample. Since then the share has been 3.7% and in some weeks more than 6%.
We publish 'historic SPP prices by weight band' in a spreadsheet at the bottom of this page. Using this information is it possible to calculate the average price for just the pig carcases under 105 kg. In the 12 months up to the beginning of October 2020, the under 105 kg average was 0.67p/kg higher than the SPP. In the period since the beginning of October 2020, it was, on average, 1.44p higher. There have been individual weeks recently when the difference has been greater than 2p, though this is not unusual in the post-Christmas period. Since the start of October the SPP and the average price for just the pig carcases under 105 kg have fallen, by 16.55p and 15.5p respectively.
So, since October, on average heavy pigs seem to have 'discounted' the SPP by 0.77p more than usual. While this is certainly not nothing, it is perhaps smaller than might initially have been expected. Considering that the SPP has fallen by more than 16p since the start of October, market factors have clearly had a more significant influence in depressing GB pig prices overall.
There are reasons why the effect of heavy pigs on the SPP might be limited. Some contracts, particularly those underpinning export trade to China, reportedly have upper weight limits above 105 kg at the moment. Secondly, in a large number of cases, when pigs are rolled due to problems encountered by processors, a weight allowance is applied. This effectively moves the top weight band in the contract, so heavy pigs are not penalised until they become even heavier.
As mentioned above, we not only publish the SPP, but also throughputs in the weight bands that go into the SPP, and their prices. We also publish a price specifically for pigs in the 70–104.99 kg weight band. This is intended to reflect those standard pigs that meet more typical commercial contract specifications on weight. Its purpose, like the SPP, is to reflect the price of pigs sold in any particular week, not set them.
While AHDB seeks to ensure that the information contained on this webpage is accurate at the time of publication, no warranty is given in respect of the information and data provided. You are responsible for how you use the information. To the maximum extent permitted by law, AHDB accepts no liability for loss, damage or injury howsoever caused or suffered (including that caused by negligence) directly or indirectly in relation to the information or data provided in this publication.