Feed fears fuel price concern
Pig farmers are calling for pig prices to remain firm, or risk the industry sliding back into the red. Industry leaders said farmers will be losing money on every pig unless the DAPP is maintained at current levels.
Bpex made the warning following the announcement last week of the Russian ban on wheat exports. Feed represents up to 60% of the current costs of pig production of which the main ingredients are wheat, barley and soya.
During July, global and domestic wheat prices shot up 40% from £103/t to £143/t due to concerns of drought conditions throughout the major cereal growing areas of Europe and Russia and the resultant impact on yields.
Russia's decision to ban all wheat exports caused a sharp rise in LIFFE wheat futures, which peaked at £168/t for November and is currently trading at £152/t, almost a 50% increase since the beginning of July.
Based on current and forecast prices for wheat, barley and soya, the cost of English pig production is predicted to rise from 137.2p/kg in June 2010 to 152p/kg in August 2010, where it is forecast to remain based on LIFFE future wheat prices.
Bpex said the impact of these increases in cost of production is that English pig producers will move into negative returns for every pig slaughtered subject to future movements in the DAPP.
It added the current situation is different to that in 2007/08 when wheat stocks were at critically low levels. Now, wheat stocks are at comfortable levels, with the main contributors being political rather than supply- and demand-driven.
Head of communications and supply chain development for Bpex Andrew Knowles said: “It is critical that we learn the lessons from 2007/8. Industry has recovered well since then and improved its efficiency. Maintaining the DAPP at current levels is essential to avoid the crisis witnessed in the pig industry in 2007/08. Retailers and the supply chain need to act now to secure supply rather than having to over-react later.”
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