Pig farmers highlight how the current market turmoil is affecting their businesses, including, in some cases, forcing them to make the incredibly difficult decision to get out of pigs altogether.
For Sophie Hope, ultimately the head won over the heart. While she tried everything in her power to delay the inevitable closure of her pig unit, hard financial reality won out in the end.
Sophie’s family have been farming pigs in Gloucestershire since the 1950s – her grandfather established the Cotswold Pig Development Company, which became part of the JSR pig genetics business. She has been running the pig business since 2013, alongside three poultry units. The last pigs will leave the farm in the spring, ending seven decades of an enterprise that has meant so much to her family.
Perfect storm
It has been something of a perfect storm that Sophie saw coming but admits she ‘buried my head’ for too long to do anything about it.
After the last crisis, she reduced the indoor farrow-to-finish herd from 380 sows to 210. Just a year ago, things were going well. The price was good, the unit was performing well and Pilgrim’s Europe, which they supply through the United Pig Cooperative, was indicating that it would be wanting more pigs in the future. Sophie was aware that a large upgrade was needed to the facilities, but the outlook felt optimistic and she was considering expanding again.
But the pig price started falling in the autumn and for the past few months, the unit has been haemorrhaging money at a price of just over 150p/kg. Then, in the spring, Pilgrim’s served notice on 30% of the herd’s pigs, taking effect in October.
“At the same time, we had a letter from an animal rights organisation that had been on the farm, which came to nothing but was another kick in the face.
“Then there was the level of investment needed to upgrade, plus the farrowing legislation that’s coming and all the environmental requirements – and I just got to the point where I thought: Why am I doing this? For what gain?” she said.
Nonetheless, the decision to give up pigs was a heart-wrenching one for Sophie. “I held out for as long as I could and I considered every option,” she said.
This included approaching various businesses about a bed-and-breakfast option, but that didn’t work out and it would have struggled to pay anyway, given the building conversion required and the need to pay someone to look after the pigs. She also considered reducing sow numbers and supplying existing local markets that pay decent prices – but, again, it didn’t stack up.
The process of reducing sow numbers has started and, after August, there will be no more serving. The last finishers should leave the farm in the spring.
Emotional attachment
“There is a huge emotional attachment to this business. I held on because I really did not want to contribute to the demise of British agriculture. I’m so proud to be a pig farmer – I love telling people I’m a pig farmer; I love showing people round the unit and I love having our own meat,” she said.
She acknowledges, however, that this emotional attachment contributed to an element of denial about the stark financial reality facing the business.
The poultry side is heavily vertically integrated, and the cost-of-production pricing model has, over the years, virtually guaranteed a decent and steady return.
In contrast, the financial performance of the pig unit has fluctuated violently over the years. “I’ve crunched the numbers and over the past 13 years, we’ve made a cash contribution of £385,000, which is not a lot to show, with a margin of 2.7% – that’s not sustainable,” Sophie said.
Based on the unit’s performance since the spring, it is currently losing the equivalent of £80,000/year. “There is no viable business justification for carrying on, particularly given the huge risk we are exposed to as independent pig producers. Just by getting out, I will already be £80,000 per year better off, at least compared with this year,” she said.
Sophie is currently seeking planning permission to transform the buildings for commercial use, which should make for a more viable business. The changes to agricultural inheritance tax rules made this an easier decision.
“My young son was very upset that the pigs are going, because he didn’t understand the bigger picture. But I’ve also got to think about what I leave him,” Sophie said. “I don’t want to be leaving him a headache, where the buildings are falling down and the business is losing money. I’d rather be able to give him a good asset that’s making money and is low-stress and low-risk.”
‘Backed into a corner’
Some independent pig producers feel they have been backed into a corner by processors in the current market turmoil, which has, again, raised questions about an imbalance of power in the supply chain.
Nottingham producer Fred Allen said the uncertainty around the market has been hugely stressful. “It’s not simply the level of the pig price – it’s the lack of certainty and the feeling that the farmer has very little control over what happens next,” he said.
“There has been a real perception from the farming side that processors have been working in the same direction to push prices down, while communication with producers has been extremely poor. Whether that is actually coordinated or not, that is certainly how it has felt to many farmers.”
What has made things particularly difficult this year is the way contracts have been handled in the context of the Fair Dealing Obligations (Pigs) regulations.
“Processors have left it incredibly late to put contracts in front of producers, and some of those contracts have been poorly written or leave farmers with very little certainty about the terms,” Fred said.
“The really frustrating thing is that I’m effectively backed into a corner. I need somewhere to sell my pigs. If I want to guarantee an outlet, I had to sign a contract by the end of August, even if I’m not entirely happy with what I’m being offered. That doesn’t feel like a particularly strong negotiating position for a farmer.
“We’re being asked to make significant long-term commitments and carry all the production risk, yet we’re sometimes given very little certainty about the commercial arrangements. That creates a huge amount of anxiety.”
He stressed that farmers are not asking for a guaranteed high price, as they understand that markets move up and down.
“What we need is transparency, proper communication and contracts that are fair and give both sides a reasonable degree of certainty. Farmers should be able to make business decisions based on clear information, rather than feeling that they are being forced into signing something at the last minute because they have nowhere else to go.”