Pig farmers under pressure as rise in the price of grain increases again
THE PIG industry is again suffering financial pressure as a result of the fastest rise in wheat prices since 1973 (there was a €57/t rise in July).
This is due to adverse weather conditions producing wheat yield concerns in three of the world's six biggest wheat exporters, Russia, Ukraine and Kazakhstan. The US, the EU and Argentina are the remaining three. This has led to an export ban in Russia and export restrictions in the Ukraine, which has caused considerable speculation in the international grain market. Increased investment fund activity and a weaker US dollar over the last few weeks have further increased volatility in the market.
The impact of this on the Irish pig producer is that feed prices, which account for 65-70pc of the total cost of production, have recently risen by €10-15/t and are at risk of another imminent rise -- the current average feed price per kg deadweight is 89c (Teagasc Feed Monitor, August 2010).
The timing of these rises is unfortunate as the industry had just returned to profitability after a number of setbacks in recent years, including high prices in 2007-2008, the dioxin scare and a sustained poor pig price.
The current difficulty is compounded by the fact that the outlook for the grain market during the spring was for the grain harvest price trend to continue at the recent low level, albeit with a slight rise. This has resulted in most pig producers who are home compounding now having no forward grain contracts in place.
However, the situation today does not look as bleak as in the 2007-2008 season when feed prices soared. Although world wheat stocks are projected to be 12.3m tonnes lower than last year, at 175m tonnes they are forecast to be 50m tonnes higher than in 2007-2008 (USDA). In addition, the reduced level of wheat exports from the Black Sea area (Russia, Ukraine and Kazakhstan) is expected to be offset by increased exports from the EU, Australia and US (+15pc). This is already in evidence with Egypt, the world's biggest wheat importer, recently switching its imports from the traditional Black Sea area to the US and Argentina for the first time in a year.
Over the next few weeks the bulk of the harvest in the EU and Black Sea region will be completed and the projections for the US maize crop (wheat substitute) will have hardened. This accurate data will help to reduce some of the speculation in the market and hopefully allow grain prices to reduce from their present panicked high to more realistic levels.