Twelve months ago, the margin over feed (MOF) was 69c/kg deadweight, the highest since 2006. Today, with a current pig price of 138c/kg and a feed cost of 108c/kg, the MOF has decreased significantly to 30c/kg deadweight, well short of the 50c/kg deadweight required for sustainable pig production in Ireland.
Twelve months ago, the margin over feed (MOF) was 69c/kg deadweight, the highest since 2006.
Today, with a current pig price of 138c/kg and a feed cost of 108c/kg, the MOF has decreased significantly to 30c/kg deadweight, well short of the 50c/kg deadweight required for sustainable pig production in Ireland.
This 43% drop in the financial margin is the lowest in the last 15 years. Why has this happened and what needs to change?
High pig margins last year stimulated a sow herd expansion (+2%) across most of the major European pig-producing countries – Spain, Germany, Netherlands, Denmark.
This increase in sow numbers resulted in a 3% increase in the volume of pigmeat produced.
Teagasc estimates that the Irish winter cereal yield is down 5-10% and the spring crop yields could see a reduction of 20-25%
This extra pigmeat had a depressing effect on pig price, further exacerbated by the slowdown in Chinese pigmeat imports, down 20% over the past two years.
While looking for positives in a difficult situation, it now appears that the Chinese have resumed high culling rates of their national sow herd as they seek to continue to move their main pig production away from backyard facilities in the cities to commercial farms in more rural areas further west.
Recent confirmed outbreaks of the deadly African Swine Fever disease will further reduce numbers, which should result in a requirement for larger levels of pigmeat imports.
The effect will be slow as it will take a significant increase in EU exports to China to reduce the volume of pigmeat overhanging the market and therefore pull up the pig price in the coming months.
On top of a difficult pig price, feed prices have increased, which also increases pressure on pig farms here.
The very difficult weather conditions we experienced of spring being very wet and summer too dry has been reflected in France, the UK, Germany and Russia, with a consequential reduction in expected yield.
Teagasc estimates that the Irish winter cereal yield is down 5-10% and the spring crop yields could see a reduction of 20-25%.
The EU and Russian outlook is for a reduction in wheat crop yields compared with 2017.
The positives are that the US soya bean and maize crops are currently looking good.
In the short term, for pig production to remain viable, prices will have to rise.
The markets are responding, with German prices increasing 16c/kg deadweight to €1.55/kg deadweight in recent weeks.
Without an immediate response from the markets, the sector here is at immediate risk of losing sows.
The consequences of this are reduced pig meat supply, decreased exports (currently valued at €715m annually), decreased employment and an increased cost to the consumer. It would also have a significant impact on the Irish cereal sector (the pig sector uses 750,000t of cereals per year).
This has serious implications for the viability of the pig sector itself, meat processors, feed millers and other associated sectors.
The market must carry its share of the cost if sustainable pig farming is to prosper.
With the current breakeven pig price at an average of €1.58/kg deadweight, a price in excess of this is needed for a sustained period to recoup the substantial losses of the past 12 months and to ensure the much needed return to profit for our third most important agricultural sector.
To address the crisis in the pig sector, the Teagasc Pig Development Department is organising a series of seminars to help farmers reduce pig production costs inside the farm gate. The seminars will focus on:
1. Reducing production costs.
2. Feeding programmes for lower production costs.
Venue 1: Ballyhaise
Location: Teagasc, Ballyhaise Agricultural College, Co Cavan.
Date: Tuesday 11 September.
Venue 2: Portlaoise
Location: Abbeyleix Suite, Maldron Hotel, Portlaoise, Co Laois.
Date: Wednesday 12 September.
Venue 3: Fermoy
Location: FBD Hall, Paddy O’Keeffe Building, Moorepark, Fermoy, Co Cork.
Date: Thursday 13 September.
Time for each venue: 2.00pm.
There is no fee for the seminars but contact Niamh Allen on 025-42457 or niamh.allen@teagasc.ie to secure your place.
Read more
My Farming Week: Cathal O’Donovan, Timoleague, Co Cork
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