Monday, September 10, 2012

Pig farmers quit as feed prices soar

The traditional British bacon and egg fry-up could become a rarer treat as the rising cost of animal feed forces a growing number of farmers to join an international exodus from pig production.

Output could fall by up to 20 per cent by Christmas as British farmers consider quitting the business rather than face mounting losses with every hog sold, according to a survey by the National Pig Association. Some 8,000 breeding sows have been culled since beginning of the year.
Pork is the latest dinner table staple to feel the squeeze caused by rising input costs – exacerbated by this year’s US droughts, which have pushed up the price of soya used in feed – and supermarket reluctance to charge more to cash-strapped customers. All livestock farmers have been affected, but feed forms a greater proportion of the costs for pig producers.

Devon-based Lester Bowker, who is quitting after 21 years as a pig farmer, says it does not make economic sense for family farms to stay in the business.

“At the moment we are just about standing still . . . we are not investing in the business. So I’m looking at it and thinking, ‘What’s the point going forward’?,” he adds.

UK farmers are part of a global trend as the cost of feed and compliance with welfare regulations hits suppliers worldwide.

Britain’s pig herd has already virtually halved in the past decade to about 420,000 sows, and self-sufficiency in pig meat has fallen below 50 per cent.

Cheap imported pork from mainland Europe were partly to blame, but farmers say these will not continue as welfare legislation and higher feed costs hit rival producers wherever they are based.

In the US, in July 8.57m pigs went to slaughter, up 5 per cent from a year before. The US Department of Agriculture estimates domestic pork production will decline by 1.3 per cent in 2013 as feed costs put farmers under pressure.

Chris Hurt, economist at Purdue University in Indiana, estimates the US pork industry will suffer as much as $4bn in losses in the coming year. European farmers will from next year face the added costs of complying with welfare regulations governing animals’ living conditions.

“This is not a UK problem, it’s a worldwide one,” says farmer Mike Sheldon, warning of growing evidence of producers worldwide liquidating their stock. Mr Sheldon previously produced 260 piglets a week but said he was now going to do something “completely different”.

As farmers wind down their activities, supply could hit “an almighty cliff” by next spring, warned James Hart, a second-generation pig farmer halfway through a cull of what was once a 10,000-strong herd.

Some retailers have recently improved the prices paid to farmers.
J Sainsbury has paid an extra 10p per kilo on top of the market price since mid-August, although this will be reviewed in October, while Morrisons pays a 5p premium. Both have taken the hit on their own margins rather than pass it on to shoppers. For some farmers, most of whom sell to retailers via processors, that still equates to a loss.

Richard Longthorpe, chairman of the NPA, puts the cost of production at around £1.60-£1.70 per kilo, almost two-thirds of which is feed. The market price is currently around £1.50.

“The key thing this time round, and it’s quite ironic, is that the pig price per se is at a traditional high,” he says. “What that means is that people can afford to get out of pigs now.”

Cash flow problems mean many farmers are making that decision. Mr Hart recently tried to see his bank manager for a review. “But he said to me: ‘I’m busy next week with all the farmers ringing up wanting to extend their overdrafts’.”


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