Pig producers must get a grip on costs

By Farmer Weekly & FWi staff

PIG farmers need to obtain a more detailed understanding of their commercial performance if they are to emerge from the present crisis.

Jamie Gwatkin of consultants Andersons told a British Pig Association seminar at Stowmarket, Suffolk, that the industry had to change to survive.

Producers needed to obtain a better appreciation of their production costs in order to make informed decisions.

The benchmarks should include their own cash withdrawals and tax liabilities, as well as the costs of livestock purchases, feed, labour and other overheads.

“Even in the present crisis, farmers often dont know their costs of production,” said Mr Gwatkin.

Technical performance

They also needed to improve their technical performance and to forge more links with abattoirs and processors. More joint ventures would help stem the massive swings in supply and demand which had led the industry to crisis.

“Farmers are getting together on the continent and weve got to do the same here,” Mr Gwatkin said.

In the present financial climate, the aim should be to get production costs down to about 90p/kg of pigmeat. (See table, right)

George Cook, also from Andersons, said farmers struggling to keep their businesses afloat needed to be realistic about their finances and to keep up a dialogue with their bank managers.

If they showed a willingness to face reality and address the relevant issues, they would find a genuine desire to help. “Be proactive with the bank – dont just react when they contact you,” he said.
A recent report on cost competitiveness in selected European countries by the Meat and Livestock Commission also looked at the competitiveness of British producers.

Pigmeat target costs
Pig purchase 3.85
Feed cost 55.00
Other variables 7.55
Labour 7.50
Power 5.00
Property repairs 1.39
Other overheads 1.36
Rent & finance 4.00
Drawings & tax 5.00
Total cost 90.65
Source: Andersons

It concluded that technical efficiency in the four competitor states Denmark, Holland, France and Ireland are now similar to or better than those in Britain. Recorded growth rates for pigs in these counties is better.

The report highlighted a number of problems faced by British producers which includes higher feed costs. The high value of Sterling, less favourable taxation and a higher level of deductions were also mentioned.

But there are some positive signs for the future, said MLC pig strategy manager, Colin Baldwin: “The Dutch industry is facing expensive environmental and welfare legislation which will, over the next few years, add about 10-12p/kg carcass to their costs.”

In Denmark, the concern to retain a market presence in the UK has forced their farmers to invest heavily in loose housing systems for their dry sows, noted Mr Baldwin.

“There are also restrictions on farm size and proximity to dwellings which are limiting,” he added.

But Mr Baldwin says that the British pig industry must find ways to keep up with competition on both cost of production and technical efficiency.

See more