Pig costs are trimmed
Pig production has become more profitable in the past year as prices have risen. But maintaining the margins for the next 12 months will depend increasingly on cost control. Philip Clarke reports
DESPITE the prospect of continuing good pig prices, Anthony Lee is preparing for a squeeze on margins as feed costs rise this winter.
The Lees have kept outdoor pigs at Dowrich since 1985, where they slot in well with the dairy and potato enterprises. There are 220 sows, supplied by Cotswold Pigs, PIC and Elite Hybrids, which are crossed with Large White boars to produce 3700 finishers a year. These are sold as heavy cutters.
"Our pigs currently kill out at 72kg," says Anthony, who with his father Michael does most of the pig work on the 235ha (580-acre) mid-Devon farm. "Over the years we have increased sale weights so as to achieve lower overheads per kilo of pigmeat produced.
"Ideally we would like to be nearer 75kg. But we cant force it, as we would then jeopardise quality and the penalties for being down-graded are high. Its all a question of balance between breeding stock, feeding and the finishing space available."
All the pigs are sold through co-operative marketing group, Western Quality Pigs, which gives the Lees a full breakdown of how each pig has graded, helping them meet the markets requirements.
"There have been many abattoir closures in Devon in recent years, so selling via a marketing group also gives us access to a wider spread of buyers," says Anthony.
As with most pig producers, both outdoor and indoor, margins have improved significantly following the leaner times of the early 1990s.
Latest MLC PigPlan costings put the average price at Dowrich in the three months to October at 117.5p/kg deadweight compared with 95p/kg for the same period last year. As a consequence, margin over purchased feed has risen from about £25 a pig to over £40 a pig.
With a further tightening of numbers throughout Europe forecast for 1996, price prospects are encouraging. But Anthony is wary of any substantial further increases as this could lead to consumer resistance and so backfire on the industry.
He also fears that a big price rise now would tempt more people back into pig production, boosting supply and triggering a downturn in the pig cycle. "As things stand, there are already good margins for cereal growers without the need to convert barley into pigmeat. Long may it last!"
But even if prices now stabilise, current margins are unlikely to be sustained as feed costs rise again.
PigPlan figures put Dowrichs October total feed cost at £151/t and values the home mix element at £128/t, similar to last year. But with barley prices rising £12/t since September, and with many straights also on the up, the omens are not good.
To some extent, feed cost rises have been offset by a prudent forward buying policy – though Anthony more modestly attributes it to luck. December rapemeal, booked over a year ago, is due for delivery at £101/t compared with a current replacement cost of £131/t. Similarly, soya meal has been pre-booked at £145/t against a spot value of £184/t.
With soya meal cover to January, rapemeal to February and maize gluten to April, the cost increases have been well contained. "But we cant hold back the tide for ever," says Anthony.
Another problem he has had to get to grips with this year has been a declining number of farrowings and higher piglet mortality – a legacy of the hot, dry summer.
"We aim for an average of 10 farrowings a week throughout the year, but for the whole of September we got just 36 and this fell to 33 in October," he says. (November has seen an improvement, as should December, as gilts bought in to replace the barreners sold in the summer months have their first litters.)
To rectify these problems, Anthony has also changed the weaning and serving routine.
Firstly, the feed during the six days between weaning and serving has been improved with a high protein, ad lib ration. Secondly, sows are now regrouped and moved back to the field immediately after serving instead of holding them indoors for an extra week. A "chaser" boar is then released with them.
"I believe this new approach improves fertility and reduces stress. There is certainly much less fighting while the sows are in heat, and our improving figures for farrowings and piglet numbers suggest it is helping," says Anthony.
The next area in need of attention is the "feed cost per kilo weight gain", in which category the Dowrich herd falls outside the MLCs top third for "home mixers".
Meanwhile, on the dairy front, the cows have now come in full time, a month later than last year after the warmest autumn this century.
Following last months deliberations on meeting the farms 1.3m litre quota requirement, the decision has been taken to lease in the shortfall. A deal was completed in mid-November for 70,000 litres of 4.29% butterfat quota at 13p/litre, since when the market has firmed to over 15p/litre.
"Those extra litres should be enough for this season, though we could be tempted back into the market if the price collapses to 5p/litre on Dec 15," muses Anthony.
Anthony Lee pours out the feed for some of the dry sows at Dowrich. Prudent forward buying has led to good savings for some of the straights bought in for the winter. But cost increases cant be staved off forever.