Negative margins persist despite falling production costs

GB pig production costs fell to their lowest level since 2009 during the first quarter of this year but the industry’s equally low price levels still resulted in negative margins for producers, according to AHDB Pork.

The first quarter production cost for the GB industry was 129p/kg, down by 6p/kg on the previous three months, due to a combination of improved productivity and the impact of feed prices reaching their lowest level since 2010.

“However, with the pig price (APP) falling by 12p/kg from the last quarter of 2015 to 118p/kg, producers lost an average of 11p/kg (or £9/head) during the three months,” said AHDB Pork, adding that the first quarter of 2016 continues the trend seen in 2015, with producers making a loss on a full economic cost basis.

In addition, looking at the futures markets, AHDB Pork said there is a “chance” that feed prices will gradually increase over the coming months, potentially increasing overall production costs, even if productivity continues to improve.

It further warned that, unless pig prices significantly improve for the remaining weeks of the second quarter, pig producer margins may well fall again, potentially to levels last seen in 2012.

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