Cost of Production

The cost of pig meat production in Great Britain increased by 12 per cent in 2007, to 121.7 p/kg deadweight. Most of the increase was due to higher feed costs, although there were also some increases in other variable costs. Some of the impact of the increase in input prices was however offset by higher average carcass weights and a further improvement in pigs finished per sow.

Feed prices in 2007 rose by an average of 22 per cent, similar to the EU average increase of 21 per cent. GB feed costs were 61 p/kg pig meat, about 8p higher than in Denmark and the Netherlands; this was mainly due to higher average feed prices in Great Britain, although better feed conversion ratios in Denmark and the Netherlands were also a contributory factor.

Costs of production increased in all the countries surveyed. Within the EU, cost increases ranged from six per cent in Austria to 19 per cent in Belgium. The average EU cost of production increased by 12 per cent to 109.7p. Great Britain remains one of the highest-cost countries in the EU, second only to Italy, which produced much heavier pigs. The lowest cost of production was 96p in Denmark.

Figure 1. The cost of producing 1 kg of pig meat in 2007

The average UK reference price was above the EU average in 2007, as it had been in most recent years. But, at 104.6p, it failed to keep pace with the rising cost of production. This implies a loss of 17p on every kilo of pig meat produced (compared with 3p in 2007) if a sustainable level of reinvestment is undertaken by producers in their businesses. This was equivalent to a loss of £13/pig or £123 million across the entire UK industry.

Feed costs continued to increase during the first half of 2008 but moved lower in the second half of the year. The cost of producing a kilo of pig meat in Great Britain is estimated to have peaked at around 149p in June/July but by the end of 2008 it was down to 129 p/kg.

Performance Trends in the British Pig Herd

Key annual trends in physical performance for the British breeding, rearing and feeding herds from 2004 to 2008 are shown in Table 1. Breeding herd results in general showed little change in 2007. Pre-weaning mortality was unchanged at 12.6 per cent but a small decline in litters per sow per year led to the number of pigs reared per sow declining from 22.3 to 22.1. However, this still represented an improvement on average results in the 2003-2006 period.

In contrast, rearing and feeding herds both saw further performance gains in 2008. Rearing herd mortality declined from 2.7 per cent to 2.1 per cent – less than half the level in 2003/2004 – and the feed conversion ratio improved from 1.82 to 1.74. Daily liveweight gain improved from 453g to 484g, reversing the drop in 2006.

Average feed conversion ratios in feeding herds were slightly worse in 2008, in part due to the increased weights of pigs in the systems. Mortality was again lower, down from 4.8 per cent to 3.3 per cent, as the incidence of PMWS fell. The average daily liveweight gain in feeding herds has also improved each year since 2003, increasing particularly sharply in 2008, to 757g.

Industry Trends

Table 2 illustrates changes in pig carcasses since 2003. Over the five-year period, there was little change in either back fat measurements or the average lean meat percentage but the average carcass weight went up by 2.5 kg. The increase in carcass weights can also be seen in the frequency distribution chart (Figure 2), which shows an increase in the percentages in higher weight bands. In contrast, the proportion of pig carcasses in the 70 to 74.5 kg band fell from 27.6 per cent to 19.4 per cent.

Table 2. Average abattoir results
Clean pigs	2003	2008
Back fat (P2, mm)	11.1	10.9
Lean meat (%) †	61.0	61.4
Carcass weight (kg)	74.1	76.6
† An average predicted lean meat percentage based on the following equations: Up to 2004: Lean meat % = 65.5 - 1.15 × P2 + 0.076 × carcass weight • 2005 onwards: Lean meat % = 66.5 - 0.95 × P2 + 0.068 × carcass weight

Figure 2. Carcass weight distribution in 2003 and 2008

Clean pig slaughterings in 2008 totalled 9.19 million, just one per cent lower than in 2007. The impact of the slightly smaller breeding herd on clean pig slaughter levels was partly offset by a further increase in sow productivity. Sow productivity, as measured by the relationship between slaughterings and the (lagged) breeding herd, averaged 20.0 pigs per sow per year in 2008 compared with 19.5 in 2007. Average UK productivity in 2008 was at its highest ever level, and as much as 3.4 pigs per sow per year higher than in 2003 – when it was being hit by PMWS.

The decline in clean pig slaughterings in 2008 would have been greater had it not been for the impact of Foot and Mouth Disease (FMD) restrictions from August 2007 onwards, which led to a considerable backlog of pigs awaiting slaughter. Because the backlog was not finally removed before the end of February 2008, slaughterings in early 2008 were higher than a year earlier.

One impact of the backlog running through into 2008 was an increase in carcass weights. Average carcass weights were therefore relatively high at the beginning of 2008. In 2008 as a whole, carcass weights averaged 76.6 kg, 0.4 kg more than a year before.

Due to the increase in average carcass weights, as well as increased sow cullings, total pig meat production, at 740,000 tonnes, was fractionally higher than in 2007. Pork production was one per cent higher than in 2007, at 613,000, tonnes but there was a seven per cent decline in bacon production to 212,000 tonnes. The proportion of bacon production accounted for by imported pork fell to 41 per cent, compared with a peak of 47 per cent in 2006.

Retail Pig Meat Purchases

Retail data from Taylor Nelson Sofres indicates that in 2008, the volume of retail pork purchases fell by one per cent. Retail expenditure was up eight per cent due to a nine per cent increase in average prices. However, demand weakened during the course of 2008. During the first quarter of the year, pork consumption was higher than in 2007 but since mid-year, consumption has been significantly lower. Demand was particularly strong over the summer months of 2007 due to the poor weather but reduced supplies, higher prices and the impact of the recession have increasingly affected purchasing patterns.

In 2007, the only pork cuts not to show growth were chops. However, the picture was much less positive in 2008. Consumption of chops declined by 11 per cent and roasts by four per cent. Belly purchases were two per cent higher although this was a much smaller increase than in the previous two years, while purchases of steaks were nine per cent higher.

Although there is some evidence of consumers trading down to cheaper cuts towards the end of 2008, retail expenditure on both pork and bacon was still higher than in 2007. The recession is not necessarily unequivocally bad news for the retail sector, as it may lead to more people eating at home, i.e. a switch from food-service expenditure to retail expenditure.

2007 saw strong demand for fresh/frozen pork. Table 4 shows that in the year as a whole the volume of retail purchases increased by six per cent. Demand was particularly strong over the summer months due to the poor weather but purchases have remained high during the autumn and winter.

Further Reading

-

You can view the full BPEX Annual Technical Report 08-09 by clicking here.