Pig sector racks up £200m losses as feed prices soar
11:45 14 July 2012
Soaring animal feed prices have forced the pig industry into further losses, a key report has confirmed.
And there is no immediate sign of an end to the 22-month run of losses for East Anglia’s hard-pressed pig sector.
Industry losses have reached an estimated £200m as producers were being paid less than 150p per kg – 20p less than the average production costs.
According to the latest figures, calculated by senior analyst Stephen Howarth, of the Agricultural and Horticultural Development Board, it costs at least 170p to raise a finished pig.
“Based on the July cost of production estimate, this means that producers are losing an average of 23p per kg, equivalent to a loss of about £18 per pig,” he added. “In recent months, feed costs have risen faster than the DAPP (deadweight average pig price), increasing the losses experienced by producers.
“Producers have now been in a loss-making position for 22 consecutive months, dating back to October 2010. Cumulative losses during this period are now approaching £200m.”
Feed price have risen sharply –partly because of the global weather conditions, which have forced up the cost of soya. Further, wheat prices have also increased as a result of the severe drought in North America and problems in the Black Sea region and also South America.
He estimated that the cost of production this month will be a record of nearly 173p per kg. Feed accounts for about 60pc of costs or some 109p per kg.
Although pre-harvest costs have risen sharply, costs are expected to remain as high as 166p/kg once the combines start rolling. In any cases, and based on futures’ prices, Mr Howarth warned that costs will not drop much below 160p kg for the foreseeable future.
In a detailed analysis, he said that the most important component of pig feed for Britain’s farmers has risen by more than £20 in recent weeks. Likewise, such price pressure also causes considerable pain to the poultry sector, which is a major consumer of feed grains.
In early June, the London feed wheat price for July delivery was £171 tonne, rising by June 15 to £175 and three weeks later, it had reached £204.25 tonne.
There have been similar increases for November futures wheat from £154.75 tonne to more than £180 tonne earlier this week.
Concerns about a delayed harvest, and also issues about quality of feed grade wheat, have added to the price pressure, noted Mr Howarth.
In an international feed grains market, the anxiety about the USA’s maize or “corn” harvest has influenced the wheat market.