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Bethan Wilkins

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AHDB Pork Market Intelligence

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Production costs at 5-year low

Home \ Prices & Stats \ News \ 2015 \ September \ Production costs at 5-year low

Latest estimates from AHDB Pork show that total pig production costs in the second quarter of 2015 were at their lowest level for 5 years.

Despite this, the average costs of 139p/kg were still over 2p above the average pig price (EU-spec APP) during the quarter, meaning that producers lost money for the second period in a row. This follows around 18 months of profitability for GB producers, although they have been in a loss-making position more often than not over the last decade. Compared with a year earlier, costs had fallen 15p/kg but pig prices by 28p, moving producers from profit to loss. However, costs were around 8p/kg lower than in the first quarter of the year, while pig prices fell by about half this amount, meaning producer margins improved somewhat during the quarter.

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The reduction of costs was largely driven by a combination of further improvements in the productivity and efficiency of the herd and lower feed prices. The latter, combined with better feed conversion, meant that feed costs made up only 55% of the total. This was the lowest level recorded since the first quarter of 2010 and more than 10 points lower than when feed prices were at their peak level in winter 2012-13. Improvements in breeding performance also helped to reduce costs overall, although this was partly offset by the depressed cull sow price, which added to replacement costs. Lighter finished pig carcase weights also limited the reduction in costs to some extent.