Feed crisis for pig industry

Feed crisis for pig industry

“At the moment the British pig industry is facing a crisis, driven by increased feed costs,” warned Stephen Howarth, AHDB Market Intelligence and senior analyst.

That situation is unlikely to change given what are being reported as record highs for grain prices and predictions in the United States that its current drought could stretch beyond October.

“Feed accounts for approximately 60% of the total cost of producing a pig,” continued Howarth. “According to our calculations for the last two years British pig producers have been losing money. Cumulative losses are adding up to about £200 million.

“Cost of production is at its highest level ever, about 173p per kilo produced. The price being paid is 150 per kilo. That’s a loss of about £18 for every pig being produced in the country.

“Since those estimates a couple of weeks ago things have got even worse as feed prices have risen sharply. Why is that? The main reason is the drought, which is affecting the main growing areas of the United States, leaving a shortage of some of the key feed ingredients around the world.

Perilous times
“The current financial situation of UK pig producers is serious. Losses at current levels are not sustainable and could force a significant number of producers to leave the industry. This would reduce pig meat production, driving up prices and increasing the UK’s reliance on imported products. Given that high feed costs are likely to persist for the foreseeable future, the only way that this will be avoided is if pig prices increase significantly.

“Availability of imports could be lower in future as well, since high feed costs will impact on the profitability of producers across the EU. Irrespective of feed prices, the new welfare regulations are forecast to result in a fall of around 5% in pig meat production over the next two years. If feed prices remain high, production could fall even more, with a significant impact on prices.

“If pig prices do increase significantly it will put greater pressure on the processing sector, which is already experiencing tight margins. Evidence for this comes from the recent announcement that Vion is considering closing its pig abattoir at Broxburn in Scotland. This could have serious implications for the Scottish pig industry, since the plant slaughters around three‐quarters of Scottish pigs, but it also emphasises the difficult trading conditions facing all processors.

“The vulnerability of the pig meat supply chain was highlighted in a recent independent study by the Centre for Research on Socio‐Cultural Change (CRESC) at Manchester University. It says there is a continuing crisis, which cannot be resolved because of ‘opportunist dealing’ right along the chain, which undermines efficiency and creates a dysfunctional, adversarial food supply chain. The report recommends that, to improve the functioning of the supply chain, there should be more vertical integration between processors and retailers and more horizontal integration between producers, through the formation of large co‐operatives. This should help make the supply chain more resilient to price shocks, such as the rise in feed prices, and enable it to plan and invest for the future.”

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