Pork cost of production update

The most recent AHDB quarterly cost of production estimation was published for 2021 Q4 after the availability of the quarterly AgroVision pig performance information. This showed the full economic cost of production had risen to an estimated 193p/kg deadweight, with pig margins per slaughter pig estimated at -£39 per head.

Since then, energy and feed prices have continued to rise and pig prices have failed to keep pace with the situation, leading to greater loses. Continued (sometimes regionally related) backlogs of pigs on farm, low pig prices compared to cost of production, and increasing input prices, are resulting in very difficult decisions for many pig producers due to their need to continue managing their business risks and their business cashflow.

Some producers have already decided to either significantly reduce stock or stop pig production. This will be driven by the individual farm situation and resources, including the significance of pig production at a total farm level and whether they have other enterprises or diversification. This could lead to short or long-term supply issues for UK-produced pork.

According to the Office of National Statistics, between February 2021 and February 2022 energy prices have risen by 22% and fuels by 23%. We are all aware that energy prices are rising again from April 2022. Defra Agricultural Price Indices indicate that feed straights increased by 16% in 2021 compared to 2020 and compounds increased by 14% over the same period.

Feed usually represents around 60% of the total cost of producing a kg of pork, but the results of the last quarter, 2021 Q4, indicate feed represented 70%. A recent AHDB podcast focused on effective management of feed on farm.

Compound feed prices are directly related to the cost of ingredients which come from various sources, some in the UK and some imported. Global tight supply, further impacted by the situation in the Ukraine, has resulted in continued upward pressure on feed prices and there is little indication that there will be any respite soon, until at least the current UK crop harvest is known, and the global situation changes for the better.

Given indications from various sources on the impact on feed prices, the changes in energy and fuel costs, and assuming technical performance within the pork industry continues to reflect 2021; we estimate that the current cost of production is in the region of 203p/kg to 216p/kg. Given the current pig prices, SPP at 150.55p/kg and APP at 153.79p/kg, and assuming a carcase weight of 94kg; this equates to losses of between £46 and £61 per slaughter pig*.

*actual figures will be available towards end of May and may vary from this estimate which is made using available data at time of writing.

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