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Danish Pig Sector Hit by Decade of Unprofitability

23 October 2015, at 12:00am

ANALYSIS - Danish pig production has not been profitable for nearly a decade. Finn Udesen head of production, economy and statistics at the Danish Pig Research Centre SEGES speaking at the Danish pig industry conference in Herning said that the last time the sector had shown profitability was in 2006.

He said that the banking crisis had put pressure on Danish pig producers because the banks were unable to accept risk and the producers were unable to invest.

Then the European market had been affected by the Russian ban on pig meat exports because of retaliation over sanctions taken in response to the crisis in Ukraine and the Porcine Epidemic Diarrhoea outbreak in the US had affected world markets.

Mr Udesen said that the average loss at present for Danish pig producers was 71DKK (Krone) per animal.

“Pig producers are having a hard time now,” he said.

“And 2016 does not look good as well. We have to look to 2017 for the market situation to look good.”

He said that since, 2009 investment in the pig sector had been low at just 25 per cent of what was necessary to maintain slaughter capacity, so slaughter capacity had also been falling each year.

This reduction in slaughter capacity, while the pig producers are striving to increase the number of piglets produced per sow and to reduce piglet mortality, has meant that alternative markets are being sought for the pigs that are not sent for finishing.

This outlet has been found in exports of nearly 12 million weaners, with Germany taking about 7 million piglets and Poland around 4 million.

These exports to Poland, Mr Udesen said, are expected to rise and nearly match the exports to Germany.

By 2020, he said the export of piglets could reach nearly 15.4 million, but he warned that as domestic slaughter falls 2017-2018 could be the last good years for exports for the producers.

Mr Udesen said that there is a wide gap between the performance of the top 30 per cent of pig farmers in Denmark and the bad farmers with the most efficient making around 962,000DKK while the average was being dragged down to losses of around 91,000DKK last year.

By 2017 the forecast is that the top 30 per cent will be making around 1.481 million DKK while the average will be just 441,000DKK. These incomes, he said, do not include the farmers’ salaries.

Similarly piglet production among the most efficient farmers is also expected to rise with the top 30 per cent producing 40 per cent of the total production.

This rise in piglet production for the more efficient farmers is being stimulated by the drive of the export market, with the best producing 2,082 piglets by 2017 while the average production will be 891.

For the fishers, production will also rise for the most efficient, but it will not be as dramatic as for the piglet export driven market.

Mr Udesen added that the Danish pig sector is also facing other challenges on the global market because while it can compete in the EU, the sector cannot compete with the US, Canada and Brazil, because it cannot match the cost of production in the Americas and also cannot compete with the currency values of the US and Canadian dollars.

However, he said the strategic aim of the industry is to increase the number of pigs for slaughter in Denmark and this can only be done with support for strategic investment.

He hoped that some finance could be raised through money coming from the EU by switching targets for investment from wholly environmental projects.

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