Pig sector facing exodus as losses reach record levels

Fears are growing about an exodus from the pig sector after latest figures confirmed that the first half of 2021 was the worst six months financially for producers on record.

New AHDB figures put the GB production costs for the second quarter of the year at 182p/kg, which is 8p/kg higher than the 174p/kg recorded in the first quarter of the year.

Compared with the same time last year, production costs were 27p/kg higher, predominantly due to higher feed and labour costs.

See also: Labour shortage may force cull of healthy pigs

While the APP averaged 154p/kg in the second quarter of the year, 9p/kg more than during the first quarter, this is still 13p/kg lower than in 2020.

This means that pig farmers were estimated to be losing 28p/kg or £24 a head between April and June – a similar situation to the first quarter of the year.

Bethan Wilkins, AHDB senior analyst, said while it was typical for pig production to go through cycles of profitability and loss-making, it was unusual for margins to be this low for a prolonged period.

AHDB’s estimates for net margins use spot feed prices, and producers would have varying buying strategies to mitigate the volatility in feed markets, so some might be less exposed than AHDB’s figures suggest, she said.

It also includes non-cash costs (such as depreciation and family labour) in the cost of production calculation, which do not affect the short-term business cashflow.

“Nonetheless, the latest estimates paint a picture of finances that will be difficult for British pig producers to sustain for long,” said Ms Wilkins.

In July, AHDB had forecast a 2% contraction in sow numbers during 2021 – equivalent to about 10,000 sows, she added.

“However, considering recent developments this could be on the conservative side.”

‘Supply chain is broken’

Zoe Davies, chief executive of the National Pig Association, said she knew of 22,000 sows which had gone already this year or where producers have stopped serving them so they can go in the next few months.

Many farmers were reducing their numbers, but she also has a list of 40 producers who were quitting completely.

Farmers were at their wits end, with labour shortages in meat processing plants now causing tens of thousands of pigs to be backed up on farms.

Plants are facing crippling staff shortages as Eastern European workers who would normally carry out the work returned home during Covid-19 and many have not returned to the UK.

As a result, some processors are 25% down on capacity.

“I have never seen it this bad. It is an absolute mess and people are getting increasingly desperate,” said Dr Davies.

Some producers were now also struggling to get hold of feed because of a combination of haulage problems and extra demand.

“They just can’t make it quick enough,” she said.

Dr Davies said the NPA was in regular discussions with both government ministers and the processors to try and work out a solution.

These conversations included the possibility of processors helping with welfare culling.

“There is no quick fix – we know that. The supply chain is broken and we need to sort it or there are going to be a lot of really good people going to the wall,” she said.