Margins positive for producers in Q3

Pig producer margins increased to £7/head in the third quarter of 2019, with the outlook for the current quarter looking even better.

AHDB estimates that the average cost of pig production in GB during Q3 was 147p/kg. This, AHDB said, was 1p lower than the estimate for the previous quarter, driven by slight falls in feed and breeding costs.

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At the same time, pig prices rose between July and September, returning producers to a positive margin, on average. The APP averaged 155p/kg during the three months, meaning producers made a positive margin of around £7/head (9p/kg) during the quarter.

This is the time the industry has been in the black since the first quarter of 2018 and compares with a break even in the previous quarter and a loss of £11/head in the first three months of this year.

Since September, pig prices have continued to rise while grain prices have remained relatively low. The APP is now nearly 160p/kg, and so for many producers, margins will have improved further in recent weeks. Strong demand on the export market, due to the Chinese ASF crisis, means profitability may well continue to improve into early 2020.

AHDB senior analyst Bethan Wilkins said: “Between mid-2018 and early 2019, GB producers lost an estimated total of £48 million. In the latest quarter, producer profits amount to around £16m.

“The better financial position of producers will need to be sustained for several more months to offset the most recent loss-making period. Nevertheless, over the past four years, producers have made a net profit of around £3/head, approximately £108m.”

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