Positive Q3 margins give way to “break-even” levels as Q4 develops

Average third quarter margins remained positive this year but have subsequently slipped “close to break-even” or even worse for spot market sellers, according to BPEX.

Based on BPEX estimates, the average cost of GB pig production during the third quarter of 2014 was just under 144p/kg. This was around 10p lower than the estimate for the previous quarter, driven by the fall in global cereals prices as this summer’s harvest became reality. This is the lowest estimate of production costs since the final quarter of 2010.

“As a result,” said BPEX, “despite pig prices falling steadily between July and September, average producer margins remained positive. With the DAPP averaging nearly 159p/kg during the three month period, producers would have made a positive margin of around £12 per head during the quarter.”

Since September, however, while pig prices have continued to fall, the cost of grain has being rising, with the result that “many producers are likely to be close to their break-even point”.

“Some, particularly those selling pigs through the spot market, are probably already losing money again,” said BPEX. “Unless the market direction changes, more producers will find themselves in this position for the first time since the spring of 2013.”

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