Average UK pig margins increased during the third quarter of this year to £19/head, on the back of falling feed costs, according to AHDB’s latest quarterly estimated net margins.
Average prices remained steady over the quarter at 212p/kg (APP), but costs fell by 5p/kg to average 190pkg, increasing the average net margin from 17p/kg to 22p/kg, with margins per slaughter pig estimated at £19.40 per head and 21.90p/kg deadweight.
Although lower than Q3 2023 figure of £25/head, this was the sixth successive quarter of positive margins, and an improvement on the Q1 and Q2 figures of £16/head and £15/head, respectively.
This period of relative stability and profitability, of course, followed 10 consecutive quarters of negative margins, peaking at -£58/head in Q1 2022.
Feed costs fall, prices remain steady
At the peak of the pig crisis during Q2 2022, feed costs averaged 175p/kg, representing 73% of total costs, before falling to a more manageable 120-123p over the previous five quarters. The Q3 2024 figure of 116p/kg is the lowest since the end of 2020, making up just 61% of total feed costs, the lowest proportion since early 2020.
Energy and fuel prices and building and finance costs also eased throughout Q3, although there has been a slight rise in other variable costs, including breeding and veterinary costs and maintenance costs.
For much of this year, future quotes for soyameal were hard to find or non-existent with questions lingering over the EU Deforestation Regulation (EUDR) which were due to come into force as of 1 Jan 2025. However, the implementation of this regulation has now been pushed back to 2026 following the European Council announcement on 16 October. Both Brazil and the US are forecasting sizeable soyabean crops this season (2024/25) pressuring prices lower, AHDB analyst Freya Shuttleworth said.
Meanwhile, wheat prices had risen during the spring in response to production concerns in Russia, but adverse weather impacts were not as extreme as first feared, helping to ease market prices over the summer months. Maize prices have also seen downwards pressure with favourable conditions leading to expectations for this season of the second largest US maize crop on record.
The APP remained fairly consistent through the first three quarters of 2024, averaging 212p/kg throughout, despite more volatile weekly movements.
But the APP and SPP have fallen during the current quarter. For the week ending October 26, the APP stood at 208.14p/kg, while, the SPP has now been in gradual decline for the last five months, dipping below 207p/kg during the first week of November.
Although prices are now around 11p lower than last year, they remain historically high, around 6p/kg above the same week in 2022.
Looking forward
While the pig price has dropped back during Q4, costs remain manageable, suggesting that producers, on average, will remain in the black.
“With producers now estimated to have recorded six consecutive quarters of positive margins, industry sentiment is noted to have improved,” Ms Shuttleworth said. “Although many farms will still be recovering their finances after the challenges faced in late 2020 to 2022, there have been positive reports of on-farm investment, especially new breeding stock and updating of buildings and equipment.”
However, she identified a number of uncertainties on the horizon for the industry. “With EU pig prices falling there is risk of import volumes to the UK increasing and pressuring prices on the domestic market. Heightened geopolitical tensions are also likely to impact global market dynamics in the coming months,” she added.
“Closer to home, last week’s government announcement that the UK farming budget is to remain the same, will result in reduced spending by Defra in real terms due to inflationary pressure. This could impact on grants for further on-farm investments to improve efficiency and sustainability or adjustments to any new welfare regulation proposals.
“Alongside this was the change to inheritance tax, highlighting the importance of proper succession planning for businesses of all shapes and sizes.”