Producer margins still positive in Quarter 3
Based on AHDB/BPEX estimates, the average cost of GB pig production during the third quarter of 2014 was just under 144p/kg. As a result, despite pig prices falling steadily between July and September, average producer margins remained positive.
Based on AHDB/BPEX estimates, the average cost of pig production in Great Britain during the third quarter of 2014 was just under 144p/kg (carcase weight). This was around 10p lower than the estimate for the previous quarter, driven by the fall in global cereals prices as this summer’s harvest became reality. This is the lowest estimate of production costs since the final quarter of 2010. As a result, despite pig prices falling steadily between July and September, average producer margins remained positive. With the DAPP averaging nearly 159p/kg during the three month period, producers would have made a positive margin of around £12 per head during the quarter.
Although this paints a relatively positive picture for producers, since September pig prices have continued to fall while grain prices have started to rise again. With the APP falling below 150p/kg in mid-November and the SPP around 3-4p below that, many producers are likely to be close to their break-even point. Some, particularly those selling pigs through the spot market, are probably already losing money again. Unless the market direction changes, more producers will find themselves in this position for the first time since the spring of 2013.
For further analysis of the latest cost of production estimates, download the document below.