Pig producers operate in one of the most volatile sectors of agriculture with fortunes fluctuating wildly between profitability and loss-making.

Over the past decade, there have been more bad years than good years but two relatively good years in a row in 2019 and 2020 gave confidence to pig producers and the wider industry. That proved shortlived with a crash in pig prices in 2021 carrying on and getting worse into 2022.

Parallel to this, production costs soared with feed costs climbing and added to by rapidly increasing energy and transport costs.

Producer incomes

In its review and outlook back in December 2021, Teagasc was estimating that the margin over feed (MOF) was 41c/kg based on an average pig price for the year of 159c/kg and an average feed cost of 118c/kg.

This was the third lowest MOF in the decade since 2012 and, as Teagasc estimates that the MOF needs to be at least 50c/kg to cover the additional costs of production, it meant that 2021 overall was a loss-making year.

Soaring energy and transport costs in the early weeks of 2022 will make this worse, especially when a pig price of 141c/kg, 18c/kg below the 2021 average, is added to the mix.

Pig producers are now squeezed between the juggernauts of rapidly increasing production costs alongside pig selling prices on the floor. Either of these would be enough on their own to cause a crisis in the sector, when both occur at the same time it becomes a disaster.

In the early weeks of 2022, the industry is in a worse situation even than it was in 2018 when Teagasc’s MOF was just 33c/kg.

That year fell between relatively good years in 2017 and 2019 when the MOF was 58c/kg, so there was some strength in the sector entering the bad year and a quick bounce back out of it.

Last year could be carried by pig producers on that basis but the problem is that 2022 is looking like it will be an even worse year.

Back in December, Teagasc estimated that for the first quarter of 2022 the MOF could be as low as 13c/kg to 15c/kg, the worst in the past 20 years, and nothing has happened since then to suggest that it will be any better than this.

It is little consolation but the current plight of pig producers is being experienced elsewhere across the EU and the UK, which despite a better farmgate price, has been beset with processing problems leading to a cull of tens of thousands of pigs for which farmers there receive no compensation.

Prices in all the major pig-producing countries in the EU are even worse than in Ireland and the presence of African swine fever (ASF) in eastern Europe has filtered into Germany frustrating export markets in the process.

Internationally, the main player is China, which produces 40% of the world’s pigmeat and also accounts for 40% of world pigmeat imports.

The most recent USDA forecast in January has revised upwards Chinese pigmeat production to 49.5m tonnes, and a 5% increase in global production to 109.0m tonnes.

The rebuild of the Chinese pig herd following the African swine fever (ASF) wipeout has been spectacular and the industry has used the crisis to restructure away from the small family unit to more industrialised biosecure systems.

Reflecting this, USDA revised its forecast for Chinese pigmeat imports in 2022 down to 4.2m tonnes carcase weight equivalent, 500,000 lower than its October 2021 forecast. It has revised the forecasts upwards slightly for Japan +25,000t, South Korea +20,000t and Mexico +50,000t.

Ireland has a presence in all of these markets and as Bord Bia points out, Mexico should become more attractive as tariffs reduce following the EU-Mexico trade agreement update.

However welcome these are, they aren’t sufficient to offset the dramatic developments in China over recent years.

Collapse in production

In hindsight, it is clear that the price surge of 2019 and 2020 can be related to the collapse in Chinese production following the arrival of ASF in the third quarter of 2018 (Figure 1). That led to a drop from 54m tonnes produced in 2018 to 42.5m tonnes in 2019 and a further drop to 36.3m in 2020.

That drop of just under 18m tonnes is 6m tonnes more than all the pigmeat available for global trade in any given year so when the rebound occurred in 2021 it was inevitably going to cool global demand and prices.

The speed of the Chinese recovery has caught the global pig industry by surprise and there are also growing concerns in China where the pig price collapsed, with live pigs now worth just one-third of their value in January 2021 at the equivalent of €1.74/kg (Bord Bia China office).