Pig production costs in the second quarter of 2014 averaged 154p/kg, around 10p per kg below the DAPP during the period and equivalent to a profit of £8 per pig according to the latest BPEX estimates.
“Producers have now been making positive margins for over 12 months,” said BPEX. “With feed prices having fallen further since June, costs in the third quarter are likely to be lower still so, despite the recent fall in pig prices, most producers should still be making positive margins.”
The production cost model used by BPEX assumes a sustainable level of investment, with buildings and equipment updated regularly. As such, the current estimates suggest that there is scope for producers to make a profit, even after such investments are taken into account.
While reporting positive margins at present, BPEX warn that it would only take a relatively modest rise in feed prices or fall in pig prices for margins to be squeezed significantly.
“Although pig producer margins remain positive, they are still vulnerable to price movements,” they say. “Even relatively small movements in pig or feed markets could wipe out any finisher profits, Movements within the range seen in recent years could return farrow to finish or breeding producers to deficit.
“With market volatility likely to be here to stay, producers should consider whether and how they can use the current favourable position to limit the impact future volatility could have on their businesses.”