By Peter Crichton
YEAR-END annual valuations are flagging up a grim picture for many UK breeders.
At the end of this year, cull sow, weaner and finished pig values are higher than they were in December 1998.
But another year with the values at least 15p/kg below the cost of production has resulted in liabilities such as bank and other borrowings rising sharply.
To arrive at the value of any pig enterprise a line has to be drawn at the end of each trading year and values submitted as far as both breeding and progeny pigs are concerned.
Apart from specialist pedigree herds, most pigs are either valued on a “cost of production”, or “market value” basis, whichever is the lower of the two figures.
These figures are then put into the balance sheet to form part of the asset value of the enterprise.
The position has been made worse by sharp falls in the value of intensive freehold pig units – especially those which lack any valuable houses and are in areas where other planning uses are hard to justify.
This weeks cull sow price crash will also hit those breeders whose accounting dates are now due. At the end of December sow values were still relatively firm.
Sow export abattoirs put a 6-10p/kg drop down to a chronic oversupply of pigmeat throughout the EU.
A spokesman from one abattoir said on Friday that the whole of Europe was “awash with pigmeat.”
He put this down to large numbers of Dutch and Spanish sows and heavy pigs already hitting an oversupplied market.
The other reason for the fall in sow prices in the UK is the weakness of the Euro which dropped further following Thursdays UK interest rate hike of 0.25%.
The 15% difference in value of the Euro translates to 12p/kg price disadvantage for all UK pig producers and also gives imported pigmeat a similar trading edge.
Dutch pigmeat futures are reflecting the oversupply position in Europe and have dropped further.
January delivery prices are equivalent to just 49p/kg liveweight for a heavy pig.
It is not until March that forward quotes on the AEX futures market show any real upward movement.
- Euro pig production to stay high, FWi, today (14 January, 2000)
- Peter Crichton is a Suffolk-based pig farmer offering independent valuation and consultancy services to the UK pig industry