Production costs rising again
Having fallen through most of 2015, pig production costs rose in the second quarter of this year, according to latest estimates from AHDB Pork. This meant that, despite some recovery in pig prices during the three months, average producer losses were similar to those in the first quarter.
At 132p/kg, the average full economic cost of pig production was 3p higher than in January to March 2016. Nevertheless, costs remained low by historic standards - the last time before this year that they were below this level was in 2009. The increased costs in the latest period were largely due to higher feed prices, following rallies in global soya markets, in particular.
Despite a modest rise in pig prices between the first and second quarters, producer margins were slightly worse in April to June than in the previous three months. On average, producers are estimated to have lost 12p/kg, equivalent to around £10 per head. This represents the worst losses for producers since early 2013. Nevertheless, with pig prices having continued to rise since then, the financial position of producers may have improved. Pig prices are now comfortably above the quarter 2 production cost estimate. However, feed prices have also increased further, which will inevitably have increased the overall cost of production too. Therefore, producers will not yet have returned to the positive situation experienced during much of 2013 and 2014.
Stephen Howarth, Market Specialist Manager
Stephen.email@example.com, 024 7647 8856