By James Garner
ANOTHER Meat and Livestock Commission forecast predicting an upturn in the pig market has yet again been proved wrong as prices slide downwards once more.
The MLC economics unit has been out of kilter for some time with its prediction that pig prices will hit 100p/kg this autumn.
But last weeks price drop may mean some producers only have weeks left in the industry, says Andersons Jamie Gwatkin.
“The MLC figures are a benchmark and are tweaked for personal use, but if the benchmark is flawed this causes problems.”
Hindsight makes criticising the MLC an easy game, but with its knowledge producers would expect predictions should be more accurate, says Scottish pig producer and Farmers Weekly Farmer Focus contributor Dennis Bridgeford.
“Many of us do our budgets based on its predictions and have been left with egg on our faces when explaining these to the bank manager.”
Defending his position, MLC senior economist Tony Fowler says forecasting is not an exact science and this has been a difficult period.
“Two things have affected forecasts – Sterling has gone up against the Euro because the Bank of England increased interest rates, and higher slaughterings than expected suggest March census results under-estimated pig numbers.”
Many producers have hung on until September when experts said the market would turn the corner, says independent pig specialist Peter Crichton.
Some are now being forced into a daily review and banks are beginning to foreclose.
In most cases banks are unlikely to support borrowings over £500 a sow, which is £125,000 for a 250-sow herd, he says.
The industry has reached a critical stage, agrees Mr Gwatkin. Some producers may be able to sustain the crisis and ride out problems but he warns that it is too risky to eat into personal equity to struggle on for a bit longer.
“Calculate your businesss equity and how quickly it is diminishing at current finished pig prices, so you know how long you can sustain production for. Then decide whether it is worth considering carrying on.”
Mr Gwatkin says the long-term prognosis is not good, and recovery may only increase imports which are 15-16% above last years levels.
There is some evidence that producers are getting out or reducing herd size, according to Mr Crichton, who says Cheale Meats increased the number of sows slaughtered last week.
And while cost-cutting might have been an option at the start of the crisis, most measures have already been taken, says Signets Malcolm Black.
“But some can improve returns by ensuring they sure hit market specifications, in weight and fat class.”
Feed conversion efficiency is the most important factor at present, he says. “A 0.1 improvement in FCR can lower production costs by 1.5-2p/kg deadweight on a 70kg carcass; worth £1.05-£1.40 a pig depending on feed cost/t.”
But cutting breeding costs should be considered carefully. “Breeding companies have cut prices, so breeding your own gilts may only be a short term gain and I wouldnt advise breeding your own boars.”
However, using AI rather than buying boars can ease cashflow, he adds.
Breeder/finisher units should consider fairly radical decisions now, says Mr Crichton.
“When you have 300 sows and three men, consider cutting back to 150 sows and 1.5 or one man and the owner doing the work himself.”
Also take pigs to heavier weights, he says. “There are some 85kg contracts and as it only costs 30p in feed to increase weight by 1kg, youre mad not to take this.”
Another option could be split sex feeding, which might help improve gilts grades, he says.