Sector's future hangs in balance
Price worries make for grim reading on pig sustainability
The resilience of the pig production sector in Ireland, as well as in other countries, has been severely tested since last year's grain harvest. Pig producers have incurred substantial losses while having to access additional working capital in order to maintain pig units in operation.
Feed normally represents 70pc of the cost of producing 1kg of pig meat. However, by last month, the average price of the feeds purchased from feed millers had increased by €81/t to around €314/t when compared with June last year. The cost of feed per kilogramme deadweight increased from 87c to 116c during this period.
These large increases in pig-feed prices are due to the worldwide rise in the price of feed grains, including feed wheat, maize and barley, driven by reduced supplies as a result of a series of weather-related poor harvests, increased world demand and more speculator activity in these commodities.
Unless pig prices increase immediately, in line with the rise in feed costs, the margin over feed costs generated for the pig producer is reduced.
Pig producers typically need a margin over feed costs of about 50c/kg deadweight to meet all other costs of production and generate some return on investment.
The 15-year (1996-2010) average margin over feed costs, as monitored by Teagasc's pig department, was 49c/kg.
Non-feed costs will vary from unit to unit and will be greatly influenced by the level of technical efficiency and the costs of financing the unit.