Lowest production costs for four years preserved margins in 2014

GB pig production costs were at their lowest for four years in the final quarter of 2014 according BPEX, who put the average cost for the period at just over 142p/kg (£116 per head).

“This is 2p lower than in Q3 and is largely attributable to a reduction in feed costs following last summer’s harvest,” said BPEX, adding that the Q4 figures was the lowest recorded cost of production since the third quarter of 2010.

Increased carcase weights, rising in Q4 to the highest level on record, also helped spread fixed costs across a greater quantity of finished product, again reducing the cost per kg of finished product.

“Overall, costs were 3p down on a year earlier, as an 8p fall in feed costs offset increases for some other inputs,” said BPEX.

Despite this, with finished pig prices falling throughout the quarter, producers’ net margins continued to tighten, standing at an average of £7 per pig (9p/kg) in Q4. This was down £5 on the quarter and was a third of the margin a year before, when finished pig prices peaked.

“With pig prices still falling and a modest increase in feed prices during October and November, producer margins would have been close to break even by the end of the year,” said BPEX, noting that further falls since then will now have taken many producers into the red.

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