Pig costs must be pared to the bone to survive
PREPARE budgets now to help decide whether there is a viable future for your pig unit. Where remaining in production is the chosen route, break-even costs must be cut to 80p/kg.
Norfolk pig consultant Geoff Fielding says that at current prices, only efficient finishers on contract stand any chance of making a margin, and warns against ignoring effects of the current crisis. "Prepare budgets now, or get someone to do some for you. Use the figures and your current level of debt to assess what action to take next."
Debt level should be the deciding factor, he says. "Debt of up to £400 for a sow and her progeny is sustainable in the long term. Anything more than that and it may be best to consider slaughtering now rather than continuing to erode the net worth of the rest of your business – first loss is the least loss."
Mr Fielding points out that where debt for a 500-sow unit is £200,000, at least £40,000 a year is required to service debt – equivalent to £4 a pig where 10,000 pigs are finished a year.
Warks-based consultant Bernard Peet warns that banks may encourage producers with borrowings to continue production until prices rise to gain a better valuation. But getting out now is a move which could pay for producers, he says: "If youre losing £5000 a month and prices dont rise for six months its another £30,000 of borrowing to pay off."
Where staying in production is viable, management tweaks wont achieve the savings needed to stave off losses, so radical action is required, says Derbyshire consultant Mick Evans. "For example, when locked into a forward contract for feed and paying way over the odds, break the contract, or at least talk to your supplier about renegotiating it."
Reducing feed costs will help, but Mr Fielding warns that break-even cost target must be 80p/kg if UK producers are to be competitive in a world market, and that options for boosting returns must be considered.
"Take stock through to finishing rather than selling weaners. Aim for a near-neutral cash balance between gilt and boar cull and replacement values so consider breeding your own replacements. Look at wet feeding to add flexibility and help take advantage of low cost feeds and by-products.
"Farm or quality assurance is a must to secure markets, and get a contract or market outlet for numbers even when you cant control price. Also, future policy must be to aim for a low debt to equity ratio," urges Mr Fielding
set in box please
* Prepare budgets
* Take action
* Break-even 80p/kg
• Prepare budgets.
• Take action.
• Break-even 80p/kg.