GB producers do better than others in Europe, as costs and prices both fall

GB pig production margins have remained more positive this year than elsewhere in Europe, thanks largely to an unprecedented price premium for UK pigs over other EU countries, according to BPEX.

Commenting on new figures from InterPIG, the international pig economists’ group, BPEX said that while average EU producers will have been “well into the red” by October, GB margins have ¬†benefitted from the UK/EU premium, with UK prices holding up “relatively well”.

The main InterPIG results focus on 2013 performance, reporting that the financial position of GB producers for last year was “among the best in Europe”. There is also a section, however, estimating how changing costs and prices in the nine months to September this year will have affected margins in 2014.

Although based on updated figures from only “some members of InterPIG”, the September 2014 analysis by BPEX makes interesting reading.

“Since 2013, feed prices have fallen across Europe,” said BPEX. “This means production costs would be significantly lower, if all other factors remained unchanged.”

Based on the updated figures, in fact, the downward effect on costs is put at between 20p and 30p per kg compared with InterPIG’s 2013 estimates. However, with pig prices also much lower than in 2013, this wouldn’t necessarily be sufficient to leave most EU producers with positive margins.

“With prices falling even further by October,” continued BPEX, “average EU producers would have been well into the red. In contrast, UK prices have held up relatively well and GB producer margins have been much more positive than those elsewhere.

“These estimates (from InterPIG) paint a relatively positive picture for GB producers, despite their above average costs and some decline in domestic prices. However, this situation has been dependent on an unprecedented pig price premium over other EU countries. This may well prove to be unsustainable, putting margins under increasing pressure.”

To protect against further price falls, added BPEX, producers will need to continue to do as much as they can to control costs and close the performance gap on European competitors.

Access the full BPEX commentary

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