Rocketing feed grain prices and falling returns have left pig producers facing an £8-£9 loss for every pig produced, according to Chris Lamb, head of marketing for Bpex.
Bpex added that a small increase in the retail price paid by consumers could see profitability revived at farm level and keep English pig farmers in business. This could be as little as 1-2p on pork products and less than 10p on loin chops.
The call comes as Bpex publishes a new report, The impact of feed costs on the English pig industry. This shows that feed costs, which account for 60% of total pig production costs, were up 30% over the last two months, due to factors including: Russian and Ukrainian export bans on grain; high demand, particularly from China; increased demand for biofuels; price speculation; currency fluctuations; and extreme weather conditions across the globe. Some producers who had bought forward feed contracts, which were now expiring, would be exposed to feed prices of up to £70/tonne higher than a year ago, it says.
Meanwhile, the deadweight average pig price (DAPP) is continuing to fall, due to price pressure from retailers. The DAPP is currently 138p/kg, or about £110 for an average pig, with production costs at 150.4p/kg. That is a stark comparison with last year when the DAPP was 146p/kg, with a pig costing 131.5p/kg to produce, leaving a £14 profit on each pig slaughtered for the producer.
Piglet prices have also declined sharply across the EU, as finishers look to pay less for them to offset increased feed costs, the report says. "The DAPP is expected to continue falling until January," said Lamb. "If we're facing a double-dip recession, then pig farmers are already in it, and wheat prices are not going to come down any time soon."
As well as the DAPP drop, abattoirs have also been taking action against losses in their part of the supply chain in recent years, leading to production cost rises. In the majority of cases, pig producers absorbed these rises, and they were not reflected in the wholesale prices being paid by supermarkets, according to Bpex.
Bpex's report, published this month, sets out a three-point action plan to make the pig sector sustainable again. First, it calls on the entire pig supply chain to ensure an increase in the DAPP through higher prices in supermarkets. Secondly, retailers need to be reminded of the importance of supporting English/Red Tractor quality assurance and high-welfare pig production standards, it says.
Thirdly, the whole supply chain must co-operate to make sure that a rise in the retail price is passed all the way down the supply chain, to producers themselves, Bpex demands.
Lamb said: "The message we're taking to the industry with this new report is clear: failure to act in the face of this challenge from high feed costs could have a devastating impact on pig production in this country. It's no exaggeration to say that the sustainability of the English pig industry is at stake."
The key to turning the situation around was getting the DAPP up, he said, and the only way to do that was to get a retail price rise. "So we need a retailer to be responsible and lead the rest of industry forward in delivering that."
Small rise, big impact
The report also shows that farmers only get 39% of retail price for pork and 22% for bacon so a small increase in the retail price could have a dramatic impact.
Lamb explained that to coincide with the launch of the new report, Bpex has also launched a new campaign website, www.pigsarestillworthit.co.uk. This will give updates to the industry on the progress of the campaign. The new website references the last Bpex industry campaign, Pigs Are Worth It, in 2007/08, which led to the DAPP rising from 110p/kg to more than 140p/kg, and also following hikes in feed costs, this time after the 2007 harvest. This was credited with saving a number of producers from going to the wall, although at that time the breeding herd was reduced by 7%.
The industry has since enjoyed a better environment, but profits had been re-invested. "The campaign has a role to play in 2010, because we are still passionate about our industry and firmly believe that Pigs Are Still Worth It," said Lamb.