Five-year low for costs still leads to negative margins

Pig farmers still lost money at the end of last year despite production costs falling to their lowest level since early 2010, according to AHDB Pork.

A combination of falling feed prices, improved productivity and better feed efficiency cut the cost of pig production in GB by 4p/kg in the final quarter of 2015, to an estimated 135p/kg.

With the pig price (APP) falling to 130p/kg at the same time, however, producers lost an average of 5p/kg (or £4/head) during the final three months of the year. This continued the trend of most of 2015, with producers making small losses on a full economic cost basis.

“Once non-cash costs, such as depreciation and family labour, are taken into account, most producers will still have been making a cash profit in late 2015,” said AHDB Pork. “However, the latest figures confirm that the situation is likely to have changed for many in early 2016.

“With feed prices relatively stable so far this year, production costs are likely to have remained at a similar level. However, pig prices have fallen sharply, taking producer losses up to around 20p/kg (£16 per pig).

“This is a large enough margin to mean a cash loss, which will likely be enough to push some producers out of the industry.”

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