‘Talk to your bank manager,’ cash-strapped pig farmers told
Pig sector leaders are urging producers to talk to their bank managers now as farm gate prices plunge to their lowest level in eight years.
The National Pig Association (NPA) warned there was “little prospect” of an improvement in pig prices this year, and said farmers should act now, rather than wait until their cashflows are under serious pressure.
While the cost of production has fallen, this hasn’t taken the pressure off pig farmers, the NPA warned.
Most pig-keepers will be operating in the red for some or all of this year, as the European pig-cycle reaches its lowest point in more than half a decade, driven by higher output, and compounded by Russia’s embargo on European Union pigmeat, it said.
Meanwhile, pig levy-payers body Agriculture and Horticulture Development Board (AHDB) Pork, said figures for 2014 showed British pork producers were behind their European counterparts across various areas.
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It said the cost of pig production in Britain fell nearly 16% in 2014 to £1.39/kg, but this was 5p higher than in the rest of the European Union, according to the 2014 Pig Cost of Production in Selected Countries report. UK pig farmers say this is down to the cost of higher welfare standards here, as well as other factors.
The number of pigs weaned per sow per year across Europe rose by 2% in 2014, up from 26.06 the previous year to 26.53. But while Denmark managed 30.0, in Britain, the figure was much lower at 24.09 overall, reflecting a lower number of piglets born alive in each litter, the report said.
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In 2014 as a whole, EU feed costs per kg fell by 17% compared with a year earlier, in sterling terms. The fall in Britain was 19%, one of the biggest drops in the EU.
But despite low feed prices, many British producers are making a cash loss on every pig they sell, the NPA said, although they were still better placed than their continental counterparts, as British pork attracts a 20p-30p a kilo premium. This is in part due to the strength of sterling, which is making imported pigmeat cheaper, but it also down to British producers being able to command higher prices due to a focus on higher welfare husbandry, it said.
According to quarterly data produced by the AHDB, British producers currently need 139p a kilo deadweight to cover all costs, including reinvestment.
However, the current Standard Pig Price, calculated from data supplied by abattoirs, has now fallen to below 122p a kilo, putting serious pressure on cashflows, even when maintenance and reinvestment have been put on hold, the NPA said.
NPA vice-chairman Richard Longthorp warned some producers may not be aware how much banking culture has changed since they last needed to renegotiate overdraft arrangements, or apply for a loan.
“Local managers have far less freedom and flexibility and consequently putting new arrangements in place can now be a lengthy process,” he warned.
AHDB Pork knowledge transfer lead Steve Winfield said the areas where Britain is falling behind its counterparts were those where the AHDB Pork KT Team was focusing to help businesses close the production gap.
“While we all focus on ensuring that we get as many pigs sold as we can, we should pay some attention to the fact that we are still just over a pig born below the EU average. Clearly we have a range of systems and genetics and often performance can be improved by better management practices,” he said.
NPA chairman Richard Lister pointed out that producing high-welfare pigs outdoors or on straw carried a “significant” cost disadvantage to British pig farmers.
“Retailers must be mindful not to kill the golden goose. If they do, they will have let down their suppliers and they will have let down their customers who continue to demonstrate they want reasonably priced high-welfare, quality-assured British pork,” he said.