The crisis threatening Ireland’s pig farming industry

Data from the Central Statistics Office published before Christmas showed that the number of pigs slaughtered in the first 11 months of 2023 dropped almost 10%, when compared to the same period in the previous year.

Looking at data over the longer term we can see that, using a rolling November to November 12-month period going back to the 1970s, the drop in the year to November 2023 of more than 317,000 pigs is the largest on record (Figure 1).

It’s also obvious from the long-term data that the pig business in Ireland is cyclical. From the mid-1980s until the year 2000, there was almost 75% growth in the number of pigs slaughtered. That trend reversed in 2000, with the following decade seeing a more than 1.1m head drop in the numbers processed.

The year 2009 was the nadir, with the years since then showing fairly steady growth to eventually hit record levels close to 3.7m in both 2021 and 2022.

However, the record drop in the 12 months to November 2023, and the established industry cycle suggests that things are likely to get worse before they get better.

The number of pigs being slaughtered is only half of one side of the story. The value of pigmeat is also a critical factor in the sustainability of the industry.

Data from Bord Bia shows that the value of pigmeat exports has fallen significantly over the last four years, with exports in the 12 months to October 2023 totalling just under €480m, a 15% drop from the more than €560m of exports in the year to October 2020 (Figure 2).

The other side of the pig farming story over the past few years has been the massive volatility in input costs. Pig farming is particularly exposed to international grain markets as the intensive rearing methods employed almost completely rely on imported feedstuffs.

If the price of Brazilian soya beans rises, Irish pig farmers are among the first to know about it.

As Teagasc analysis points out, 75% of pigmeat production costs are feed costs.

According to data from Teagasc, the estimated feed cost per kg deadweight (dwt) was 155c in 2023, virtually unchanged from the 156c in 2022, but far ahead of the 100c to 120c range that existed from 2017 to 2021.

However, the average price of pigmeat in 2023 has been well above the 2022 level, with Bord Bia data showing it at 214c/kg, compared to 178c/kg in 2022. That, by itself, would be good news for pig farmers if the trend had held for all of last year.

Unfortunately, rising prices turned in mid-September and have fallen significantly since, dropping from a peak of 225c to end the year under 200c.

It is also notable that the price difference between the UK and Ireland currently stands at more than 50c/kg, with British farmers still getting close to 250c/kg.

Industry as a whole

Looking ahead to 2024 for the industry as a whole, Teagasc’s Annual Review and Outlook for 2024 predicts lower profitability for the sector as prices will remain under pressure. There is expected to be some good news as the price of feed is forecast to drop, with soya bean, maize, barley and wheat all likely to continue their recent price falls. Teagasc puts the average feed costs for 2024 at 139c/kg dwt.

On the price side, there is less good news. All signs point to Chinese domestic production remaining high next year, reducing that country’s reliance on imports.

With China a key market for Irish product – Ireland exported €175m of pigmeat to Asia in the year to October 2023 – a sustained drop in demand from there is going to keep a lid on any price growth here.

With larger European producers such as Germany, Spain and Denmark all facing the same reduction in Chinese demand, competition for market share within the EU is likely to be very intense in the coming year. Overall, Teagasc says the outlook for 2024 is for modest profitability, with margins over the cost of feed improving during the year as the price of grain falls further.

Carried losses

Unfortunately, for many Irish pig farmers, “modest profitability” is very far from where they need to be as many of them are carrying significant losses from the almost 18 months of negative margin that existed into the spring of 2023. A PwC report for the IFA in 2022 showed that a 600-sow farm was facing monthly losses of €39,000 in that year.

Many farmers were forced to borrow to cover those costs, and now need to be able to book larger profits in order to rebalance their books. With interest rates where they are at the moment, any recent farm borrowings could quickly erode margins, pushing farmers back into difficulty.

Teagasc also points out that low profitability on farms means there has been less capital investment than there should have been in recent years, meaning farm efficiency is lower than it otherwise might have been.

Also, on the processor side, the large drop in throughput of pigs means that factories may be running below capacity and not achieving maximum efficiency.

. A higher processing cost per kg at the factory means a lower price per kilo for the farmer who themselves may be operating at less than maximum efficiency due to the lack of investment caused by lack of profits.

The Irish pig industry has become increasingly concentrated in fewer and fewer farms over recent decades, with – depending on how it’s counted – fewer than 200 productive units left in the country.

The product they sell is processed as a commodity. There are not many ways to add value to a piece of pork which make sense at the scale which most pig farmers operate at these days.

Some of those pig farmers are already facing difficult choices.

The Irish Farmers Journal spoke to some at an IFA meeting in Portlaoise last month and the feedback ranged from grim to angry.

One said on prices: “If we go through another bad spell I won’t be in it [pig farming]” while another said “it’s a ruthless game, a big money business. We’re last in line and we’re getting hammered.”

The IFA said it had invited representatives from the processors to attend the meeting, but none showed up, further adding to anger. “We need clarity on the future as we face into 2024,” IFA pig chair Roy Gallie said.

Overall, it looks like 2024 will be a difficult year for pig farmers. Any who are coming into the year with little or no debt will be in the strongest position.

Those who have had to borrow heavily to cover recent operating losses are probably already facing significant difficulties.