Pig producers were typically losing £7/head during the last quarter of 2018 as soaring costs and falling prices hit the bottom line.
However, there could be better times ahead, according to AHDB due to tightening global supplies and higher demand.
The average GB cost of production stood at 156p/kg during the quarter, remaining at the highest level since 2013. This was unchanged on the previous quarter but 12p/kg up on the same period in 2017.
But pig prices continued to fall. The EU-spec APP averaged 148p/kg in the fourth quarter, 4p/kg down on the previous quarter and 9p/kg down on the last quarter of 2017. The price index of 19p/kg lower than the recent peak of the third quarter of 2017.
The upshot is that producer margins fell to -8p/kg, equating to a loss of approximately £7 per pig sold. This compared with a loss of £4/head in the third quarter of 2018 and means producers have been in a loss-making position for over 6 months now. For comparison, in the final quarter of 2017, producers were typically making £11 on every pig, down from £23/head the previous quarter.
The good news for producers was that the cost of feed fell slightly between the third and fourth quarters of 2018, dropping 1p to 96p/kg. Feed accounted for 62% of total costs. Labour costs also eased slightly, accounting for 12p/kg.
AHDB analyst Bethan Wilkins said: “However, it’s important to remember the estimated cost of production is a full economic cost. This includes non-cash costs such as depreciation and family labour, which don’t affect the cash flow of businesses.
“Non-cash costs are estimated at 15-20p/kg, meaning on a cash cost basis, many producers will still be in the black. Of course, there will be variation between individual producers. While the current margin is unsustainable in the long-term, producers can endure this situation for some time.”
But she added: “However, the outlook for the coming months is perhaps a little more optimistic. Tightening supplies and rising global demand might lend support to pig prices, and there are signs that feed prices may start to ease off.
“Nonetheless, it is difficult to look ahead without clarity on how the UK will be trading with the EU (and the rest of the world) after March 29.”
