Costs clobber UK pig men in Euro-competition

By Philip Clarke, Europe editor

BRITISH pig producers continue to suffer from a higher cost base than their continental competitors, according to a new report.

The report says the total cost of producing a kilogram of pigmeat in Great Britain comes to 92p, compared with just 78p in Holland, 84p in Denmark, and 88p in Ireland.

The report, prepared by the Meat and Livestock Commission, points to higher feed and labour charges as particular problems faced by British farmers.

“Labour costs are higher, principally due to the lower use of family labour,” it says.

“It is estimated that family labour in Great Britain accounts for 35% to 40% of the total, whereas in Holland and Denmark it can account for up to 65%.”

Continental producers also benefit from cheaper feed, it notes, due to the greater influence of producer co-operatives in this sector.

For example, Dutch and Danish producers pay about 52p in feed for each kilogram of pigmeat, compared with British 65p in Britain.

The lack of competitiveness is exacerbated by the fact other countries have over-taken GB in levels of physical performance.

Carcass weights are also much higher on the continent.

“It is estimated that production costs could be reduced by about 2p/kg for every 5kg increase in carcass weight,” says the report,

But such benefits, it adds, would have to be balanced against any price adjustment for heavier carcass weights.

British pig producers have also had to bear the cost of early conversion of their buildings to loose housing systems, affecting about 40% of the pig herd.

This has cost the industry about 214 million, equivalent to 1 a pig.

The write-down period for buildings is also much longer in this country at 25 years, compared with 15 years in other European countries.

Farm-gate prices are also the subject of larger deductions in GB, averaging 4.22 a pig, compared with 2.21 in Holland, 1.07 in France and less than 1 in Denmark.

This puts GB producers at a 3p-5p/kg disadvantage.

There are some crumbs of comfort in the MLC report, however.

In particular, the value of sterling is likely to fall, having a profound impact on the competitiveness of GB producers

The MLC estimates that a 10% drop in the against the euro would knock about 5p/kg off production costs.

The report also points to increasing environmental and welfare constraints in competing countries.

“It seems likely that the competitive position of Holland will be eroded over the next 10 years,” it says.

“Legislation has already been announced that will require a move to loose housing for sows and a substantial increase in space allowances for breeding and finishing pigs.”

This could push up production costs by 12p/kg.

Denmark is also expected to suffer from tougher environmental conditions in the next few years.

But, while this may even things out in the EU, it will not help in the fight for global market share with the US.

Average production costs in the USA are put at 75p/kg, and where the best 10% produce pigmeat for as little as 62p/kg.