Net margins remain negative for pig producers

Estimated GB pig production costs in the third quarter fell slightly to 178p/kg, having posted a record 182p/kg in the previous quarter, according to the latest AHDB estimates. However, compared to the same time last year, Q3 production costs were still 20p/kg higher.

Feed costs remain high, with little sign of respite coming soon. A tight global market for cereals is supporting the cost of pig feed ingredients. Labour and fixed costs remained steady compared to the second quarter of 2021.

Pig prices increased again in Q3 compared to earlier in the year. The APP averaged 163p/kg in Q3, 9p/kg higher than in the second quarter. However, finished pig prices have declined since then, and so profitability is only likely to have been challenged even further. On average, pig producers continue to be in a significant loss-making situation. Estimated net margins stood at -15p/kg (or -£13/head) in Q3 2021, meaning negative margins for four quarters in a row. These latest estimates imply an unsustainable financial position for many British pig producers.

The EU-spec APP averaged 154p/kg in October. This is lower than the Q3 average, and prices continue to decline. Prices in the EU are also weaker than they were, and an imminent reversal in European oversupply looks unlikely, given ongoing coolness in Chinese import demand. Feed markets have kept their strength, and the forward market is supported by high energy and fertiliser costs. Unfortunately, prospects for British pork producers remain extremely difficult, even without the immediate practical challenges faced by many in physically moving slaughter-ready pigs off farm.

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