Pig farm income slump in year to April 2016 shows impact of falling prices

Overall pig farm business incomes (FBI) fell by 56% in the year to April 2016.

This put FBI, which essentially represents profit, at £21,645 as a result of falling pig prices and rising costs, with labour bill increases of 26% contributing heavily to this.

However, the disparity between the best- and the worst-performing pig farms in England narrowed, as average earning gaps decreased by £30,500 in 2015/16 – representing a drop of 14%.

For the first time in a number of years the incomes for contract rearing/finishing businesses were actually higher than that of breeding units.

See also: Pig farmers’ share of retail price reaches 31-month high

This is according to the latest analysis from the Farm Business Survey, which has recently released the annual Pig Production in England report, comparing the performance of 62 specialist pig farms where pigs account for more than two-thirds of output.

Diversification became more important on pig farms during the report period as businesses struggled with falling farmgate prices.

Key points 

Statistics from the report showed:

  • Farms in the top 25% performance category earned an average of £122,200 per farm in the year to April 2016. Despite this, top-performing farm businesses were hit the hardest and saw turnover from pig sales drop 37%
  • The worst-performing pig farm lost £59,800
  • The average pig farm income was £21,645 last year
  • Pig output from the lower performance groups actually increased
  • Despite falling prices, pig numbers rose 2% on the previous year
  • Breeding units felt the full impact of falling pig prices, as turnover from pigs fell by 13% to £17,402
  • Contract rearers saw management fees remain relatively stable despite signifcant increases to the wages bill
  • The bill for wages and salaries totalled 12% of pig farm output in 2016/17, an increase of 26% on the previous year
  • Higher wage bills ate into profits, totalling 12% of top-performing farm output and 14% of the lowest-performing group’s financial turnover
  • Pig producers continue to increase farm income from diversification. Last year 9% of output on pig farms was from diversified activities, a 4% increase on the previous year and 2% higher than the average farm business.

Continuing difficulties

Rachel Lawrence from the Farm Business Survey said the results reflect the nature of the sample, with independent producers a lot more exposed to fluctuations in the pig market than those who are contract rearing or finishing.

She said: “The falling pig price (in the year to April)  2016 hit those farms selling direct into the market hardest. The impact would actually have been more severe, if many businesses hadn’t increased throughput through the year.”

Ms Lawrence added that continuing difficulties in the labour markets were making wages a key component to the profitability of pig businesses.

Farm business income explained 

FBI essentially represents net profit and needs to cover private drawings, tax and reinvestment for sole traders and partnerships. FBI represents the financial return for all unpaid labour (farmers and spouses, non-principal partners and their spouses and family workers) and on all the owner’s capital invested in the farm business, including land and buildings.

For corporate businesses it represents the financial return on shareholders’ capital invested in the farm business.