Producers Losing £10 a Pig, and More

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Producers Losing £10 a Pig, and More

09 July 2012

UK - Not only have British pig producers had to cope with monsoon-type weather conditions which could soon be causing problems with harvest, but much worse than this have been recent reports of soaring grain and soya prices on the commodity markets, writes Peter Crichton.

As feed relates to over 60 percent of pig production costs even the slightest movement can have a very major effect on producers' margins. During the past week ex-farm feed wheat prices have risen to £193.00/tonne and July futures traded at £204.25/t onnetoday compared with £148.00/tonne at the start of 2012.

Soya prices are adding to the pain and trading levels are hitting close to £400/tonne which is also forcing up oilseed rape prices and other feed ingredients.

Pig prices have on the other hand remained relatively flat and although the DAPP put on 0.36p and now stands at 150.31p, all of the major shout price operators followed Tulip's lead by standing-on and the rain gauge now reads as follows:

152p Woodhead
151p Gill
150p Tulip
148p Cranswick and Vion.

Spot buyers reported a fairly quiet week with loins hard to sell and as a result they did not feel the need to dig any deeper than they did last week with spot bacon traded around the 150p mark.

Signs are emerging however of slight shortage of pigs in the system with the average DAPP sample weight down and no reports of any pigs being rolled, but we need to see an improvement in the value of the euro which weakened on Friday to 79.4p.

BPEX are now quoting cost of production prices in the region of 172p/kg deadweight which is more than 20p/kg above spot and contract prices giving rise to losses of up to £15/pig.

Cull sow demand has however remained reasonably firm and although no more money was on the table, most sellers were able to achieve prices in the 113p–116p range according to specification.

The weaner market continues to bear the brunt of feed price rises with the latest AHDB 30kg ex farm weaner average quoted at £42.32/head and 7kg piglets are reported to be trading at £30/head and lower in some cases.

To put the feed price crisis into context it is difficult to buy compound dry sow rations at less than £225/tonne, lactating sow at £245/tonne, grower feed at £315/tonne and finisher feed an eye wateringly £260/tonne.

Even a rough calculation reveals that the cost of sow feed per piglet works out anywhere between £15-£20/head, it costs a further £70 to feed a 7kg pig to baconweight, so overall feed costs alone can amount to £100/head to which another £20 has to be added to cover rearing, fixed and variable costs.

With pig prices at their current levels many producers will be losing £10 per pig sometimes more and unless the industry can persuade the retailers to increase prices by this amount, it looks as though further herd closures are on the cards.

However just to demonstrate that the processors are not necessarily the bad guys, the recent shock news that Vion are due to close their Broxburn Scottish plant where losses are working out at up to £50/pig through the system, also came the bad news for the industry as a whole and especially for our colleagues in Scotland who are already facing much higher haulage and feed costs as well as even more challenging weather conditions.